Two-sided marketplace business model

A two-sided marketplace is a business model that connects two distinct groups of users, typically buyers and sellers, and facilitates a transaction between them. The marketplace itself doesn't own the inventory; it simply provides the platform for the transaction to take place.

Key characteristics

• Connects buyers and sellers: The core function of a two-sided marketplace is to bring together buyers and sellers.
• Shared inventory: The inventory is provided by the sellers, not the marketplace owner.
• "Hands-off" approach: The marketplace owner typically has a "hands-off" approach to the individual transactions, although they may provide tools and services to facilitate them (e.g., payment processing, reviews and ratings).
• Chicken and egg problem: A key challenge for two-sided marketplaces is the "chicken and egg" problem of attracting both buyers and sellers. It's difficult to attract buyers without sellers, and it's difficult to attract sellers without buyers.
• Focus on the money: A common strategy for solving the chicken and egg problem is to focus on the side of the market that has the money. In most cases, this is the buyers. If you can attract a critical mass of buyers, sellers will follow.

Examples

• E-commerce marketplaces: eBay, Etsy, Amazon Marketplace
• Crowdfunding platforms: Kickstarter, Indiegogo
• Real estate platforms: Zillow, Trulia
• Ride-sharing apps: Uber, Lyft
• Dating sites: Match.com, Tinder