But at the platform level, competition confronts the existence of large returns to scale and/or network externalities, leading to natural monopoly situations and a winner-take-all scenario. Network externalities can be direct: I am on Facebook or Twitter because you also are; I will use Uber or Lyft if many drivers do so. Network externalities can also be indirect: We may not care directly about the presence of other users on the platform, but that presence leads to improved services, as in the case of many apps or delivery services. For example, I want to use Google’s search engine or Waze if you also use them, as the quality of predictions improves with the number of users.
Natural monopoly situations lead to widespread market power, and a concomitant willingness to lose money for a long time to “buy” the prospect of a future monopoly position—think of Amazon or Uber.