Two-Sided Marketplace – Meaning, Model, Verticals And Trends


Have you always been suggested by your mentors and CTOs to invest in a two-sided marketplace? Have business marketplaces like Uber always excited you but are you still not sure as to what two-sided marketplaces are? Well, we just got you covered!

What is a Two-Sided Marketplace (or two-sided network) ?

Let’s start with a simple example of a mall where consumers can find their favorite brand shops on a single platform. They no longer need to visit the two extreme corners of the city just to locate the respective showrooms of Louis Phillip and Lewis, as this is now facilitated by a common platform, a mall in this case. This is what a two-sided marketplace is.

A two-sided market or a two-sided marketplace is basically a platform for two user groups to conduct economic exchange in return of network benefits to each other. A simple example that explains the concept better will be that of credit cards where the user groups are cardholders and merchants. More the merchants accepting card payments, more convenient it would be for users to make payments through a card. Similarly, more the users having cards, more merchants would prefer to install card payments at their premises. Thus, in two-sided markets, both the parties have to benefit equally for it to be a success. Further, each group should prefer to bring in more members on the other side in order to boost the business.

Two-Sided Marketplace

A two-sided marketplace is essentially a proportionate relationship wherein both the parties are benefited from the success of each other. For example, the online advertisers greatly benefit from the social media sites as these websites have a huge targeted base of potential customers. As the number of users accessing the social media sites increase, the same boost is witnessed by advertisers in their profits, as now they can reach a large number of targeted audiences. Similarly, when a social site has a large number of active users, advertisers also start joining the social media network to fetch the best out of the website, which in turns proves profitable for a social media site. Thus, as the number of users increase, both social media site and advertisers are in profit. You are getting the drift, right?

This pretty much sums up the concept of a two-sided marketplace. The success of various startups like Uber, Airbnb, and the likes has brought these businesses into the limelight. This is the reason perhaps why everyone is looking to try their hands on the niche. If you too are sailing on the same boat, and are looking to have probable ideas for launching one, it is essential to get yourself acquainted with the emerging trends.

The Emerging Trends in Two-Sided Marketplaces

One of the important trends seen in two-sided markets today is the rise of vertical markets. It is a market where the goods and services provided by the vendor are industry-specific. This means that these markets cater to the specific needs of the customers and compete within a particular area of operation. Some of the vertical markets where two-sided models are prevalent include agriculture, accountancy, architecture, banking and various others. Given below are three such startups that have entered the competitive field.

  • Artsy

Artsy offers a platform to access any kind of art if users have an active internet connection. It basically helps collect art. Artsy provides information about museums, galleries, art fairs, artists and anything related to art. With a database containing huge collections of artworks, it is gaining popularity among art lovers.

  • Skillshare

Skillshare is a learning community which helps people all over the world to learn what they like. It has a wide variety of classes from which users can choose courses according to their interest. The plus point is that Skillshare allows users to attend classes from any corner of the world. The classes can be customized as per the requirements of users as well. Thus, skillshare lets users sharpen their skill at no cost.

  • Storenvy

With Storenvy, users can buy commodities from some of the best brands of the world or alternatively, can start their own brand. It showcases a wide range of products which are difficult to find elsewhere. In addition, it provides the facility to start your own online store within a very short time.

Now, that you have understood the basic concept of a two-sided marketplace and are just about to launch it, just hold on a bit more. Undoubtedly, gaining traction in a two-sided marketplace is not as easy as it seems to be, all thanks to the tough competition. But, definitely, proper planning and flawless execution of strategy can help you in your endeavours.

Steps To Put Up a Good Two-Sided Marketplace

A successful two-sided marketplace provides a platform for the producers and consumers to interact effectively. This means that it connects the producers and consumers. If the network has to function properly, there must be a rise in the number of both groups. Though it is thought to be difficult to establish a two-sided market, you can now make it possible by following the steps given below.

Know your skills

When you are about to start a new venture, it is always best to know yourself first. You should know your skills and areas of expertise. While choosing a field, it is highly recommended to go for an industry you are familiar with. When the field is known to you, it is easy to understand the consumers’ needs and deliver what they want.

The right kind of interaction

Before you own a two-sided market, you should know the kind of interaction required for the startup. This includes the processes the consumers and producers must go through to ensure maximum benefit for each other. You should have a plan in your mind as to what transactions will happen on the platform. For example, on an online shopping site, the producers list their products and the customers make an order.

Bringing both the parties together

This is a tricky part of two-sided markets, should the producers come first or the consumers? In the beginning, you may find it difficult to attract both parties because the platform might not produce enough value. As an initial offer, you might like to give monetary subsidies and even attractive product features to draw the attention of more users.

Provide a liquid platform

Enabling liquidity means that when the producer offers something of value, you must ensure that it has proper demand in the market. When a product is listed, you need to make it easily accessible for the target customers. You win when customers’ needs are promptly satisfied which in turn would automatically prove profitable for the sellers.

Optimize the platform

Like it is important to learn from mistakes, so is learning from success. You should always keep an eye open for users’ comments. This would help you understand as to what exactly led to the success or failure. Use the so collected feedback to optimize the platform further. You might do this by prompting easy to fill feedback forms on your websites.

And that’s it!

Over to You

Today, the two-sided marketplace is the talk of the town as it not only offers a good amount of profitability once established but has also become an important link between producers and consumers. An excellent example of such a marketplace is Uber which has risen to one of the most successful on-demand service providing companies. It links the riders with the drivers and enables a healthy interaction between them.  Though it does not have drivers or cars of its own, it provides a platform with proper rules and standards. This pretty much sums up as to what all it takes to establish a successful marketplace.

What are your views on this? Do let us know in the comments.

December 30, 2016



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