A Study On Social Network Sites Based On Two-sided Markets Theory

As the hottest application on internet, social network sites has got few researches. Two-sided markets theory, which is the new progress in industrial organization field, is suitable for the study of the price decision making of social network sites.In this thesis, two issues are proposed: Firstly, which style two-sided markets do social network sites belong to? And secondly, how the two-sided markets theory tools could be used to make the best price decision making for the aim of profit-maximizing?Firstly, according to the taxonomic approach of two-sided markets, the social network sites, which is a complicated network platform with multi-sided markets , have both media platform and software platform characters.Secondly, as the analytical framework of Armstrong (2006) is expanded, the paper presents a optimal pricing model for for the monopoly platform, under the condition that the direct network externality on the user-side. Some beneficial conclusions are obtained. Because of the direct network externality on the user-side, the platform owner usually provides subsidy for user-side, for the aim of more users to join. Advertisement is the most important and steady income for the platform, the benefit from user to advertising agency is more, the advertising agency side price is higher. The price which platform owner made to third-software developer is optional. If the benefit from third-software developer to user is enough, the platform owner usually provides subsidy for user-side, for the aim of more users to join.