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Navigating the world of two-sided markets

Written by James Hind on Monday, 19 December 2016. Posted in Tech talent, Innovation, Technology

Startups that are effectively acting as middlemen between consumers and suppliers need to find a way of pleasing both parties

Navigating the world of two-sided markets

Tech startups have changed the game for consumers, creating a fairer and more even playing field where transparency and value are fast becoming commonplace. In an age when we’re ever more focused on doing this responsibly and efficiently, it's not surprising to see more two-sided market models emerging where the startup is responsible for looking out for the interests of the people who want things as well as the people who can supply them. And for the most part, the outcome is overwhelmingly positive. But this trend is still in its infancy and it's not all been plain sailing.

Some tech startups are grappling with the balancing act of keeping both sides of their market happy. At the end of the day, two sided market model only works when both supply and demand are equally engaged and fulfilling their part of the deal. Resolving any tension in the chain is crucial.

Take Uber, the ride-sharing app, for example. When it launched in 2009, huge numbers of drivers signed up, attracted by the ability it gave them to make their own hours and earn extra money at their convenience. But while delighting riders by providing better value and more convenient inner city transport than ever before, Uber has had its fair share of run-ins with drivers. Finding the right balance between charging a fair price and paying a fair wage is crucial to its business model and to delivering the service it’s become famous for.

Meanwhile, Airbnb, the peer-to-peer homestay network, has changed the way people think about booking accommodation – even for the most mature segments of the market. But there was a time not so long ago when when we were hearing reports of irresponsible guests causing damage to the homes they’ve been renting. The Airbnb we see now is increasingly supporting hosts just as much as guests and as a result the business has largely left behind any early concerns from hosts.

There are plenty of other examples, such as Rightmove, the property website that was initially considered a threat to estate agents. Customers could compare properties side by side without the hassle of visiting multiple estate agents. Rightmove managed to communicate to the industry that it wasn’t there to compete with but rather to help both estate agents and buyers. It has since been embraced by the industry as simply another marketing tool to connect buyers with sellers that removes the hassle for both parties.

At carwow, we face exactly the same challenges and put just as much energy into resolving tensions for both sides of our market. We’ve learned from businesses like these that it’s vital to balance the needs of both the supply and demand sides of your marketplace. While consumers do in many cases save money due to the increased choice and transparency carwow facilitates, our business is set up to support the dealer market too so that prices aren't driven down so much that they become unsustainable.

Dual marketplaces can increase efficiency, transparency and choice by using smart technology to connect supply and demand. We’ll see even more of these businesses spring up in the coming years but only startups that can adapt to the needs of both of their audiences and keep the lines of communication open will enjoy success.

About the Author

James Hind

James Hind

There’s no doubt Hind is a natural-born entrepreneur. After an internship at an investment firm put him off a career in the City ‘for life’, in 2013 he launched carwow, the car-buying platform. Since, carwow has driven over £850m in car sales, with 3% of new cars in the UK being purchased through the platform, and has recently opened its first international territory in Germany.

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