Markets have been around for millennia, but the characteristics of digital platforms seem to be new. While product companies, such as diamond mines, protect their profits through barriers to entry, platform companies make profits by, for example, facilitating entry for drivers on Lyft and merchants on Alibaba. While the best product company’s supply chains use just-in-time inventory, platform companies outperform this model by selling goods and services for which they do not incur marginal costs. Market boundaries are blurring and new routes to market dominance are emerging. Platform companies do not behave like product companies. They innovate faster. They work with fewer employees, often by an entire order of magnitude. Many of them are young and yet achieve a higher market value than their established competitors. These new companies play by new rules, which pose a challenge to traditional companies that work by old rules.

Digital platforms have a number of characteristics that explain their attractiveness as an organisational model. Firstly, digital platforms contribute to a significant reduction in transaction costs, including distribution, search, contracting and monitoring costs. For example, aggregation platforms such as TripAdvisor and Expedia collect and bundle travel information from various sources on one platform, reducing the cost of searching for information and utilising the services of intermediaries. Secondly, digital platforms help to organise and coordinate the technological development of complementary products through modularity and appropriate governance structures. For example, Apple’s iOS and Google’s Android platforms offer independent software developers a technical and regulatory structure that facilitates and incentivises their participation in application development.

In addition to these characteristics, other properties are also important, such as generativity and network effects. Generativity is defined as the ability of a technology to produce new results that are supported by a large and heterogeneous user community. For example, the generativity of crowd sourcing platforms enables them to find new solutions to difficult problems based on the diverse contributions of a large number of participants. Network effects reflect the fact that the value of the platform for a participant increases as the number of participants increases.

IP challenges and strategies of digital platforms

The development of streaming platforms was a big step in the transformation of the business ecosystem of the media sector, and media is a leading example for other sectors of how the digital transformation is changing business. To make this transformation of business models successful and sustainable, companies needed to define their patent strategies and build a strong and suitable patent portfolio. In the case of streaming services, for example, companies are trying to use data on the purchasing behaviour of streamers to place targeted advertising tailored to the individual streamer. One example of the optimal implementation of this type of new business model is the collaboration between the Chinese tech company Tencent and the British AI and product placement experts at Mirriad, who have a very strong European patent portfolio to protect the new AI-based business models.

With Mirriad’s digital product placement technology, the product placement is subsequently inserted into the original content using digital technology. This has many advantages over the classical product placement:

  • The placement can be integrated without the usual time and organisational pressure, as the product is not integrated directly on set and the integration does not have to be synchronised with the usual film processes.
  • The artistic creative process is not disturbed. The director and actors do not have to adjust to the product during the actual production and can devote themselves entirely to the film
  • The product placement can be controlled in detail. While the design of the placement in the classic case is influenced by many people and can rarely be perfectly planned in advance, you have full control during the subsequent editing.
  • The product placement can be removed, updated and adapted at any time – similar to today’s search engine marketing.

And the British company has successfully established some of the most effective patents in its business ecosystem in Europe. The two granted European patents:

show how consistently Mirriad thinks in terms of IP with a view to future platform business models.

About the research project

To better understand the IP strategies of digital platform companies, a new research project is starting at the CEIPI conducted by MIPLM graduate Leonhard Brader. The project will be supported by the AI-based patent search specialists at predori, whose tools will be used for the analysis of the relevant patent portfolios. Here you can read more about the approach of predori to AI-based patent search in our interview with their CEO and founder Stefan Brehm. Their tool is ideally suited to support the research project, since their AI is not a black box, but gives the user full transparency about the patent search.