How Nesting Changes Platform Strategy

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How Nesting Changes Platform Strategy

By Elizabeth J. Altman et al., | MIT Sloan Management Review | December 03, 2025

3 key takeaways from the article

1. Nested platform is an arrangement where one platform embeds into another platform’s user experience. The host platform gains partial or total control of the customer experience. The nested platform provides an embedded experience. User experiences span both platforms, which aim to create value for users while increasing their own strategic advantage. A host may choose to allow multiple platforms to nest into it.  Similarly, a nesting platform may choose to nest on multiple hosts.
2. These nesting structures have implications for the business models of participating platforms. Along with the advantages, there are trade-offs on both sides.
3. Once you’ve identified the potential to have nesting relationships, you must determine how close the relationship should be and how the parties will handle data access and data sharing.  Should we host, nest, or do both?  How may nesting relationships affect our governance?   How might our resource requirements and costs be affected by nesting?  Does a nesting relationship expose us to competition or brand conflict?  Do we gain new technological capabilities by nesting?  How tightly should we integrate, and how much functionality should we offer?  And what data can be collected, accessed, and shared? 

Full Article

(Copyirght lies with the publisher)

Topics:   Strategy, Business Model, Platform Economy

Extractive Summary of the Article | Read | Listen

Nested platform is an arrangement where one platform embeds into another platform’s user experience. The host platform gains partial or total control of the customer experience. The nested platform provides an embedded experience. User experiences span both platforms, which aim to create value for users while increasing their own strategic advantage. A host may choose to allow multiple platforms to nest into it: Amazon Music, Apple Music, Spotify, and other streaming services are all nested into the Sonos platform. Similarly, a nesting platform may choose to nest on multiple hosts; for example, Spotify also nests into other hardware platforms, such as Amazon devices that use its Alexa virtual assistant. Further, platforms may choose to nest in some cases and host in others. Spotify, for example, nests into Sonos’s app but also has its own Spotify Connect interface, which allows it to function as a host with device platforms nesting into it.

These nesting structures have implications for the business models of participating platforms. Along with the advantages, there are trade-offs on both sides. A nested platform gains expanded reach by joining an ecosystem that already has its own customer base, helping to drive the network effects that enable the nested platform to keep growing and remain viable. Yet it also cedes some control of its own ecosystem, customer experience, data, and brand visibility to the hosting platform. A hosting platform gains additional capabilities and features for customers, along with access to new markets and  complementor ecosystems, but it also provides potential competitors with an entry point to its customers.

How Nested Platforms Create Value.  Platforms facilitate exchanges between interdependent and complementary groups of users.  They often act as matchmakers, bringing together producers and consumers or connecting users with each other. They are frequently powered by cross-side network effects: The more users on one side, the more valuable the platform becomes for the other side, and vice versa.  Nesting one platform within another can be a powerful strategic move for both hosts and nesters.  When nesters embed their offering in a host platform, it helps them reach new users and may fuel additional network effects as the feedback loop attracts even more complementors.

Once you’ve identified the potential to have nesting relationships, you must determine how close the relationship should be and how the parties will handle data access and data sharing.  Should we host, nest, or do both?  How may nesting relationships affect our governance?   How might our resource requirements and costs be affected by nesting?  Does a nesting relationship expose us to competition or brand conflict?  Do we gain new technological capabilities by nesting?  How tightly should we integrate, and how much functionality should we offer?  And what data can be collected, accessed, and shared? 

Nested platform structures offer hosts and nesters the opportunity to enrich their value propositions, reduce the risk of being outpaced by more dynamic or specialized competitors, and maintain their positions as central gateways in their users’ digital lives. As these structures increasingly become the norm, and as interconnected platforms dominate more and more industries, leaders managing platform strategy must consider nesting as a core part of their agendas.