How to Build a Two-Sided Marketplace

Building a two-sided marketplace is something that is no easy feat. Though it may seem obvious on paper, it is quite tricky to handle. Almost all startup founders tell us the same thing. They think that building a two-sided marketplace is something that is quite difficult, though it is also extremely attractive from a business perspective. While it is true that is is difficult in many respects, there are plenty of examples that prove that you can still achieve it.

eBay is one of the examples of being able to create a two-sided marketplace. oDesk is another excellent example. Nowadays, Airbnb is doing the same thing as the other two applications but in the vacation rental market.

Understanding Liquidity Hacking

Liquidity hacking is one of those strategies that the successful marketplace businesses employ in an endeavor to reduce the challenges that you can associate with low transaction volumes. It is necessary to narrow down the scope drastically if you care to achieve it. You may need to do this drastically till you can find sufficient scale to either expand or accomplish a broader marketplace.

This type of hacking is something that you need to do in order to succeed in this market sector. It is imperative for you to realize that the marketplace businesses works well only when it is at scale. If you have hundreds or thousands of users, either on the supply side or the demand side, then everything might work well for you. But the significant problem that you might face is how to get to that point.

Need to Provide Value

Offer Portfolios

Most people these days would like to showcase their work online. In years past, people used to do this by creating a custom or a personalized website. Fortunately, these days things have become quite simple.

You can find an array of online tools that any individual can use on various applications. By allowing users to utilize the portfolio tool on the web application, you can solve the supply challenge that you have. Behance, Dribble, and Carbonmade are three of the web applications that are successful in showcasing work.

Build Community

Your focus next is to build both a healthy and vibrant community on either both sides of the equation. When you do this, you will end up with the potential for an excellent marketplace. StackOverflow is one of the best examples that you can find of a robust and active community.

Tools You Offer

Ensure that there are many free tools that your users can utilize for without any fees. By doing this, you will increase the number of users on one side of the equation. Git, OpenTable has some of the web application tools that provide this option to their users.

Scrape Listings

For example, you may plan on scrapping real estate listing using the website Craigslist. You should then plan on modifying the list with a better UX. It is quite challenging to connect the supply and demand mainly since you do not own the supply yet. You are going to get the best conversion rate when you let the supplier know that you have a customer in place that they can access once they register or sign up for free.

Narrow Down the Problem

It is quite essential for you to focus where your efforts are going towards the business. Since you are going to work with limited resources, it is necessary for you to use them wisely and optimally. Some of the things that you may plan on doing are the following:

Your Primary focus should be on the geography. It is obvious. Check every local marketplace that is available.

It is essential for you to focus on a niche community rather than putting efforts on everything. Lastly, it is necessary for you to focus on one particular vertical.

Curate One Side

One of the best ways to make things functional when it is at low volume is to curate one side. Many people are not sure if a “curated marketplace” is a real marketplace. Curation is one of the essential things that you might need to do. It opens the doors for you to move from a listings model to an open-call transactional model.

One of the best ways to bring efficiency to your model is by choosing this particular method. YourMechanic is one of the best examples when it comes to this kind of model. Instead of throwing a massive list or directory, they give you the option to select one among the two mechanics shown. It is effortless to choose one of them as they both seem to be good.

Use Hamsters

When nothing is working, it might be essential for you to use hamsters. It is one of the brute force methods. Initially, oDesk was acting more or less like a recruiting agency. But the team never lost the vision of what it could become in the future. They used to search for a candidate to meet the demands manually. Over a period, things progressed. Now, there is enough supply and demand. You need to start throwing bodies at the problem until you have enough scale that can assist you in reducing the manual requirements in a process.