by Allen P. Adamson, author of “Seeing the How: Transforming What People Do, Not Buy, To Gain Market Advantage“
You’ve undoubtedly heard it said that every story has two sides. Two sides to every story is the storyline for finding opportunities by seeing like a broker. The easiest way to think about what constitutes a two-sided market is to consider a business that facilitates direct interaction between suppliers and users via an intermediary platform. Among the two most well-known examples are Airbnb, which has to recruit and retain homeowners who want to rent their residences and, on the other side, the people who stay in their homes, and Uber, which has to recruit and retain drivers with cars as well as the people who wish to ride in these cars.
Both sides of each of these businesses pose strategic and execution challenges. This is true no matter how simple the market. My daughter, home from college last summer, was making extra money as a “Dasher.” She sat around our home until her phone buzzed from the DoorDash app. She then walked to a restaurant a block away from our home and delivered a meal to someone who lived a few blocks in the other direction. Without the two-sided app that DoorDash uses, she would never know of the meals that need to be delivered or the people who wanted them.
Remember what Groucho Marx said about how he wouldn’t be a member of a club that would have him as a member? The two-sided market depends on those willing to set those insecurities and issues aside and get on board: the influencers and those who follow where they go. It is only by way of a preponderance of people stepping up and joining on both sides that you get the density of participation required to make the service viable.
The Push-Pull Of The Two-Sided Market
The two-sided market is a juggling act. You are a brand, which means you need to monitor and be mindful of what is being provided by the supply side and how it is being received by those demanding a good experience on the other. It is a dynamic that is rife with strategic and execution challenges, all while you try to stay profitable. The chicken and the egg are always in flux. In the case of Uber, it’s the issue of having the right number of drivers for a given number of people wanting a ride at a particular time. Events, weather, political turmoil, and local rhythms are just a drop in the bucket of what stands in the way of achieving this balance.
Successfully sustaining each side of these businesses poses a uniquely difficult strategic and executional challenge. Obviously, successfully doing so means staying profitable. It’s a chicken-and-egg dilemma.
Chicken-and-egg strategy problems arise when the value proposition to each of two separate groups depends on penetration in the other. An example is an auction site like eBay, with the number of buyers driving attractiveness to sellers and, likewise, the number of sellers driving attractiveness to buyers.
Customers — the demanders — want a platform that has a great variety of suppliers, and suppliers will only take part if there is adequate demand. Which comes first? Equally challenging is maintaining quality, especially when many of the suppliers in two-sided markets are independent contractors, be they Airbnb homeowners who rent out their places, Uber drivers who use their own cars, or owners of city garages who are on the supply side of the parking-space algorithm.
As difficult as the challenge of building a two-sided market may be, some of the most powerful companies in our modern economy were started by marketers who looked through this lens and saw the opportunity to act as a broker and change consumer behavior. Etsy, eBay, Uber, and Airbnb have had a disruptive impact on their respective categories. So, too, have many smaller, but also successful, two-sided marketers.
Taking on the mantle of broker requires the ability to identify strong players on one side and truly know what is wanted or needed by consumers on the other. Your ability to discern, deliver, and maintain a consistent level of service will allow you to deliver an experience only you can provide.
The easy part is knowing that there are drivers with cars and people who need a ride somewhere. Just as any proficient juggler will tell you, a small number of balls are easily kept in the air. Three drivers, three riders—done and done. With a little practice, all six balls are smoothly kept in the air. The challenge is maintaining a balanced supply and demand. It is making sure the experience offered by the supplier is good enough to attract and keep the customer. When two-sided markets fail, they do so not because the opportunity wasn’t there; they fail because the broker couldn’t keep all the balls in the air. They fail when suppliers fail to materialize or fail to deliver at the promised level of service; they fail when the broker doesn’t grasp consumer demand sufficiently to keep the suppliers happily on tap.
When the balance is struck, it must be maintained, and that requires vigilance, yes — but more than that, it requires a broker who understands all of the players and brings an empathy toward and profound appreciation of the issues facing each side.
*excerpted from “Seeing the How: Transforming What People Do, Not Buy, To Gain Market Advantage“, copyright © 2023 by Allen P. Adamson. Reprinted with permission from Matt Holt Books, an imprint of BenBella Books, Inc. All rights reserved.
Allen P. Adamson, author of “Seeing the How: Transforming What People Do, Not Buy, To Gain Market Advantage” is a noted expert in all disciplines of branding. He has worked with a broad spectrum of consumer and B2B businesses in industries from packaged goods to hospitality, technology to healthcare. His previous books, including BrandSimple and Shift Ahead, are used as textbooks in higher education business programs nationwide.
