Customer entrepreneurship on digital platforms: Challenges and solutions for platform business models

Abstract

Drawing on the mixed methods of qualitative research and agent-based simulation, this study examines: (a) how end-users use digital platforms to become customer-entrepreneurs undertaking commercial activities on platforms; and (b) how platform providers can convert this customer entrepreneurship into a revenue stream. Considering that end-users have traditionally been defined as passive and uncharged actors in platform business models, an in-depth understanding of their commercial activities and the viable revenue model to monetize this emerging customer practice is warranted. Our qualitative study reveals that customer-entrepreneurs make substantial use of platform offerings to advertise their products; communicate with end-consumers; and accept payments. These commercial activities are largely exercised for free on platforms, even though they could otherwise serve as a source of revenue. On this point, our simulation results identify two pricing models achieving the generation of nearly identical revenues over time. First, platform providers may charge both advertising and transaction fees, which maximize the survival of professional customer-entrepreneurs. Second, platform businesses may levy advertising fees only, which maximizes the survival of informal customer-entrepreneurs operating on a micro-scale and part-time basis. This study offers theoretical, methodological, and managerial implications for platform studies.