Platform business

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.