Guide to Multi-sided Platforms

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Information about Guide to Multi-sided Platforms
Business & Mgmt

Published on March 7, 2014

Author: CarnabyLabs


Guide to ! Multi-sided ! Platforms #startups Scott Taylor! Carnaby Labs @ScottTaylor

“The new hot startup model ! is being an exceptional middleman” Quartz Carnaby Labs

Demand Multi-sided Platform reduce search costs
 reduce transaction costs! making audiences Carnaby Labs Supply

Chicken-and-egg problem. The supply side won’t engage until there is sufficient volume on the demand side, and vice versa. Also known as “cross-side network effects”. ! Whether it’s is a chicken-and-egg or a chicken-or-egg problem depends on whether participation adjusts more rapidly downward toward equilibrium or upward. Carnaby Labs

How can you overcome this challenge? Carnaby Labs

1. Focus on one niche target group. Carnaby Labs

2. Create sufficient (high quality) inventory. Carnaby Labs

3. Create demand. Carnaby Labs

4. Add more supply. Carnaby Labs

High barriers to entry. If you can successfully attain cross-side network effects, you will hopefully have a privileged position in your market; having created high barriers to entry. ! A cautionary note: attention should be paid to switching costs and whether or not the demand side can easily participate in multiple MSPs within the same market. Carnaby Labs

Even without fixed costs or economies of scale, MSPs typically need to attain critical mass when they are launched in order to even survive. Carnaby Labs

A viable multi-sided platform. At the prices chosen, there are many individuals, on both sides, that want to participate. G is the globally stable equilibrium. Carnaby Labs Schmalensee (2010)

A non-viable multi-sided platform. At the prices chosen, no matter how the MSP is launched, there will be too few individuals on either side of the market with low values of Ω. ! This scenario is common. Simply because lots of ideas for MSPs are not attractive to one or both sides of the market to be viable at prices that cover cost, no matter how they are launched. Carnaby Labs Schmalensee (2010)

Thanks, let me know if you found this useful! @ScottTaylor Carnaby Labs

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