Software Components and Product Variety in a Platform Ecosystem: A Dynamic Network Analysis of WordPress

Abstract

Software components such as application programming interfaces (APIs) provided by external developers are vital to online digital platforms. Although APIs generally increase the variety of products according to anecdote, the precise relationship between the categories of APIs and product variety is not yet known. We find that APIs, regarding their use frequency, are categorized into three groups. The core is a group of frequently used APIs, whereas the periphery is a group of sparsely used APIs. In a large and mature platform ecosystem, an additional group of APIs, the regular core, mainly provided by third-party developers, emerges. APIs in the regular core are the main driver of product variety. However, we also find that the strength of this effect diminishes in a newly created product category when most of the new products are built by duplicating the usage of APIs from other products. A platform owner can stimulate developers’ creativity by acting as a bridge between digital product providers and third-party developers. It can collect functional needs from third-party developers and then share them with product providers. Therefore, the latter can build APIs that developers need.