How can you create a platform business by enabling a two-sided market?
First, let’s see what a platform business is:
- Creates value by facilitating interactions and transactions between multiple groups, typically known as “sides.”
- The “sides” can be producers, consumers, or other participants who benefit from the platform’s services and network effects.
- Network effects create a virtuous cycle where growth attracts more participants to all sides of the platform.
- Revenue is generated through monetization models that include transaction fees and subscriptions.
Examples of platform businesses include Airbnb, YouTube, and Uber, among others.
So, how do you enable a two-sided market?
- Increasing active usage: User commitment and active usage, not sign-ups or acquisitions, are the true indicators of customer adoption.
- Offering participation incentives: Users who participate obtain value that is organically aligned with the interactions made possible by the platform.
- Improving the UX: Every user interaction must be frictionless, including those done via an API.
APIs can help with the creation of a platform. However, they’re not the only thing you need to consider when attempting to move into this type of business.