How to Get a Two-Sided Marketplace Off the Ground

June 13, 2015

8:00 am

Building a two-sided marketplace is tough. At best, that’s an understatement. Because a two-sided platform caters to two distinct user groups that derive value from the other, building such a network can quickly become a chicken-and-egg scenario, which ultimately requires asking people to take a leap of faith without much proof.

We encountered this struggle with Pear – catering to big brands on one hand and local community groups on the other; however, through some deliberate choices and great insight from our advisors, our growth has been steady and quick – but it hasn’t been easy.

1. Identify a Starting Point

One of the first questions you need to ask yourself is: who do you need to target first? Then, how do you demonstrate your value and keep this audience around for the long haul?

In most cases, building up supply early on is more challenging than generating demand. In order to attract quality supply (i.e., brands) in the early days of Pear, we had to ensure our value proposition was strong enough to persuade them to try the platform and that we could deliver on what was promised.

2. Focus, Focus, Focus

Building a strong marketplace model takes time. Even some of the most successful marketplaces took years to get off the ground. Be diligent when building up your initial supply and demand communities, by targeting specific locations, demographics, or verticals.

Focusing your efforts on a small faction will help you better understand the dynamics and behavior of the groups you’re working with. While that knowledge takes time to learn, it’s essential to scaling in the long term.

To test user behavior, Handy initially launched its home services platform in targeted areas of New York, San Francisco, and Boston.  By focusing on a few concentrated geographies, Handy’s founders received a crash course in user behavior, which proved vital as the platform has successfully expanded into 28 markets.

3. Find the Game-Changer

When we set about building Pear and bringing brands onto the platform, we found success in seeking out individuals at these brands who also thrive on innovation. Every industry and every company has its mavericks – the people willing to risk budgets, their reputations, and sometimes even their jobs to test out new ideas. Find those people and get them excited about your idea. Prove to them that they can’t afford not to take a risk on you.

For Pear, grassroots marketing and community-level sponsorships are oftentimes a departure from the expensive ad campaigns and sponsorships brands are used to pursuing. With this in mind, we sought out those game changers who were willing to champion our idea within their business and offered them the opportunity to conduct pilots. These pilot programs lowered the barrier to entry, making it easier for them to commit to trying the platform without taking on a lot of risk.

4. Balance with Demand

As we took time to develop our supply, we were always very conscious of balancing with demand. Being able to generate initial demand was vital to showing our value to brands and keeping them around long enough for the network effect to kick in.  Every business – especially those disrupting more traditional, mature markets – should test how much demand they can generate.

Uber can attest. While building its platform, Uber’s co-founders and friends banded together as the initial crew of drivers to test demand levels and determine their initial growth rate.

While building Pear, striking the balance between supply and demand was always at the back of our minds. We knew that oversupplying meant we couldn’t connect brands with their target demographics and that generating too much demand from community groups would leave them frustrated and looking elsewhere for sponsorships.

5. Foster Your Community

To truly grow your business, never stop fostering both sides of your network. Ask for feedback. Reach out to users. Hold meetups. However you need to engage them, find a way and do it. Fostering a strong sense of community and generating loyalty with both sides of your platform will help your marketplace grow.

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Amish Tolia is co-founder and chief of strategy at Pear, a company enabling brand marketers to build meaningful connections with community groups at scale.

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