Double-Sided Secret: How to Attract Business and Coax a Thriving Network without Losing Your Mind
In order to coax a thriving double-sided marketplace, an intricate dance must be adhered to between businesses and their two distinct consumer bases (sellers and buyers). A delicate balance is required to massage the supply and demand chain. While one side of your customer base produces, the other purchases. The key is in understanding how to attract both sides and coax a self-sustaining network without losing your mind in the process. It can be done – and we’ll show you how.
Inside a Double-Sided Market at Work
First it’s important to ask the question: how does it work? Let’s take Facebook, for example. There are two components to Facebook’s business model. Along with being a social media network that appeals to just about every demographic under the sun, the user-friendly platform is also a powerful tool for advertisers.
Here’s why it works: users generate content and provide information about themselves to Facebook (supply) and then Facebook turns around and sells the collected information to advertisers (demand). By growing one side of the equation, you’ll ideally attract the other.
Let’s take the Facebook example again. Through focusing on the user experience and appealing to broader demographics, the social media network draws in more users. Naturally, then, it becomes more valuable to advertisers as a direct result.
Balance is Key
Balance is absolutely critical when it comes to developing a double-sided market. Despite what we wish were true, it is absolutely possible to have too much of a good thing. When too much demand is generated on one side of the equation, that’s what’s called oversupplying. The same is true when there’s too much of a supply for one part of your market to find exactly what they need. Maintaining balance helps with form and success. Remember, there doesn’t need to be a completely equal 50/50 split between your target markets. It can take some time to find the right ratio for your markets and company.
Double-sided markets tend to be most effective when there are more users on one side of the market versus the other. Take Uber and Lyft, for example. Both services should, ideally, consist of more individuals (customers) requesting rides than drivers seeking work.
Generating Initial Demand and Supply
As your platform grows to match demand on both sides of the coin, your company’s overall value will grow. The key, of course, is generating that initial demand.
The first step is to cement the user experience for early adopters/niche users. This should occur well before you can even begin to appeal to a broader audience.
Building excitement attracts passionate users. You’ll want to play a direct role in building things up from the ground level, especially when it comes to generating demand. With Uber, the co-founders actually drove around as the first Uber crew in order to test out demand and get a sense as to what Uber needed to do to grow proportionately.
Airbnb did the same thing. The founders of the app would often go out and meet hosts and photograph spaces (supply) in order to help generate demand from users.
Get a sense of what your initial market wants. You may not know what your other market may be at first, but it will come in time. No double-sided market can work without a stable initial market. Get to know what your market needs and work on building your initial base. As you begin to grow your base, shift your focus on bringing your marketplace to the next level.
Shifting Focus to Growing Supply
Now it’s time to focus on building the other side of your market: the sellers. Once demand exists, naturally you’ll need to ensure that sellers exist to fulfill it and continue a self-sustaining market.
The key is providing support for providers or the other side of your market. Make tools available and ensure sellers have an easy way to get a hold of you. Once suppliers are secured and are able to conduct successful transactions, it’s unlikely that they will abandon your platform. The key here is ensuring that the initial costs for sellers to get involved (time, energy, and money) are low enough to deter leaving the platform for another.
Nurture Both Sides
Remember that as your community grows, you should continue to nurture both sides. The key to success behind any double-sided market is fostering loyalty and trust between both sides of the community and between members from within the different sides. Lyft, for instance, often holds community rallies to drum up support for their drivers and riders. This builds brand loyalty and emphasizes the mutual importance of both groups.
Don’t worry if growth does not grow nearly as fast as a SaaS or an e-commerce marketplace. It can take time for your business to grow if it’s a complex double-sided marketplace.
Another key to success is to make it simple for users to give feedback and reach out to other users of all communities involved. Double-sided markets are only as strong as the sum of their parts. Continue to nurture both sides and, naturally, both sides should continue to grow.