7. Understanding the Power of Third Party Payer Businesses and Online Gateways

This chapter introduces our final two patterns, which represent powerful, even potentially dangerous, online business models. Individually, each can be very profitable. Together, they can result in almost unlimited harvesting of profits from the rest of the online ecosystem. The first pattern is Mandatory Participation Third Party Payer Systems (MP3PPs). Third Party Payer Systems are platforms where Party-1 (the customer) uses Party-2 (the platform) to interact with Party-3 (the merchant or service provider who needs to interact with the customer). The platform is free for Party-1 because Party-3 values it enough to subsidize it, or even to pay enough to make it available without charge to Party-1. A Mandatory Participation Third Party Payer System is one where the platform has become so essential to Party-3 that Party-3 must participate, almost without concern for the cost of participation. Online gateway systems are platforms that are used to link buyers and sellers. Sometimes there are effective competitors for a gateway, as when multiple markets can be used to trade securities, or when the eCommerce sites of multiple big box stores sell the same appliances. Sometimes a single online gateway becomes essential for sellers, such as Amazon in books or Google in search.