Research On Pricing Mechanism Of Mobile Application Platform Based On Two-sided Market Theory

With the development of technology, global mobile Internet business expanded rapidly. Then Apple launched its own mobile application platform-App Store on2008, and created a completely new business model. Once launched, App Store got great success. As the great success of Apple’s App Store, terminal manufacturers, operating system providers, telecom operators and other internet companies join the business in succession, leading the business to be the hottest nowadays. There is a new flourishing situation in online application platform market.However, after2009-2011years of breakneck expansion, the mobile application platforms commonly encountered profit difficulty issues in recent years. On the one hand, profit difficulties result in some platforms are forced out of the market. On the other hand, profit difficulties lead to a lack of incentive for developers, resulting in the spotty quality and serious homogenization of the application software. From a very large extent, The fundamental cause of the problem is the lack of reasonable pricing mechanism of platform. The mobile application platform is a typical two-sided market. The greatest feature of this business model is open and it provides a sales platform for mobile application developers, so developers can communicate with consumers through the platform. The platform provide service and support for the two sides, which constitutes a bilateral market structure similar to the operating system. Therefore, as it is a typical two-sided market, pricing mechanism is in a key position and plays a leading role in the competitive strategies of centrality, directly affects the options of participants on both sides and platform trading. Then it affects the market share and profitability of platform enterprise as well. Hence, how to setting the price for different types of participants to reach the platform best demand and trading volume, which resulting in more profit of the platform is the key problem. Meanwhile, it is the purpose of this research too.Based on the theory of two-sided market, this research analyzes the influence mechanism of its industrial characteristics on the pricing of platform firm, and develops a pricing model of mobile application platform. First of all, this research states the background, significance and the object. Then based on serious analyzing of relevant documents, the text introduces the research of two-sided market, especially the virtual two-sided platform. This research attempts to analysis the market characteristics of mobile application platform. Based on the above study, this research focuses on the mathematical modeling of the platform pricing. With analyzing the influence of three major factors:market structure differences, the choice of developers’ belongingness and terminal performance differences, this research comes to some conclusions. Firstly, the pricing of mobile application platform enterprise primarily depends largely on the effect of intra-group network and inter-group network. The asymmetric pricing structure depends on the interaction of network externalities under different circumstances. The effect of intra-group network on consumers which decide the tend of subsidy in monopoly situation. Secondly, If the market structure of mobile application platform is competitive, the asymmetric pricing slope direction of platform is depends on the choice of the developer to multi-homing or single-homing. If more and more developers are allowed to multi-homing in duopoly situation, its price will be increased, as well as the profit of platform. Thirdly, the more excellent quality of terminal performance is, the higher pricing of customer are. Besides, the pricing of developers depends on the quality of its software. If developers tend to choose one platform to join, this will result in more competing between platforms for high quality developers. Under this circumstances, Terminal performance platform will subsidy the high quality developers. Finally, the effect of inter-group network on pricing depends on the market structure of platform and vested options of developers. In conclusion, the research gives some suggestions to the development of mobile application platform and summarizes the research conclusion and deficiencies. In the end, it proposes the further research direction.