How to Build A Two-Sided Marketplace
My thoughts on the two sided marketplace and chicken and egg problem (“How do you get buyers when you have no sellers on your app?”):
In building Hypetroop Market and Innovator.Supply which are two-sided marketplaces, I have learned the following:
Balance the supply and demand by…
1: Firstly, building out the supply side
I’m eagerly accepting resumes on Innovator.Supply and on Hypetroop Market — I’m trying to fix the flow then market it to freelancers. Why? Focus one region at a time and generate supply there. Many apps spread themselves out thin across too many places and regions which creates a miss match — not taking into account regional differences such as competitors and the overall market landscape.
Offer them your service for free with the promise you’ll get them customers, jobs, or whatever. Get people on and make the barrier for entry as low as possible. For example, on Innovator.Supply I have a one-click resume dropoff option because you must assume the users as lazy because why shouldn’t they be at the early stages?
2: Building out the demand side
When you manage to create first suppliers’ base you have to balance the market with the demand. This is the time to focus on generating first customers, getting traction. This is crucial step for you business — you have to prove it has potential to be profitable and both sides will be happy. This is basically your value prop being completed on both sides.
If you’d focused on getting your customers first, they would leave quickly because without suppliers, you wouldn’t be able to deliver both sides of the value proposition. If a customer has a tainted opinion of your business, it’s hard to get them back.
3: Scale out
Replicate this, region by region. Life time Value, Cost Per Acquisition and other key metrics are highly important to understand.
Check this out — Casey Winters, the first Marketer at Grubhub wrote this:
AMA with Casey Winters, Product Lead for Acquisition at Pinterest, First Marketer at GrubHub
What he said on growth
For early stage growth, I still use my framework (described here: http://caseyaccidental.com/this-week-in-startups). And I pick from that menu which couple of tests to try. If I have engineers, I tend to focus on the product changes that make sense as they tend to have the highest impact. If engineering is very constrained, I pick from the performance marketing programs that make sense for the business. For example, are people searching for this type of product already? Then use SEO. Does the product generate revenue, and is LTV sufficient? Then try SEM and Facebook ads. Does the product get better if another person joins it, and does the user know that? Try virality. Can you give something of value if someone refers someone else and make your money back on it? Then try referrals. How good is the conversion flow, and are there easy fixes?
For performance, I carve out small budgets to test a couple of initiatives, then focus on the best performing tests for a while until I hit diminishing returns. Generally, with these tests, you’re either close to a CPA target or wildly off. I focus on optimizing the ones that are close. Performance marketing initiatives tend to have an efficient frontier, where if you spend more than this amount, you basically pay more for every user you sign up, without getting many more users in return. So I scale up until I hit that. Usually that requires hiring a dedicated person for it.
What he said on retention:
By far the biggest thing is making the core product better, not adding new features, just making what you have more reliable and a little bit better every day. Most companies get too sidetracked building totally new things because that’s fun, but that’s not usually what matters unless your core product has plateaued (like Snapchat before Stories).
Other than that, emails and notifications are the easiest win to help retention. They don’t solve core retention problems, but they do add more retention on top if they are done well and remind people about the value of the product. At Grubhub, we eventually invested in loyalty programs, and that was very impactful and very fun work.
Go on and read what the first Grubhub marketer had to say, but it’s a meticulous process that needs a high attention to detail and data!
In the early stages, I suggest making something called a lean canvas. Check this out: LEANSTACK: Lean Startup and Business Model Canvas Tools, Content, and Coaching for Entrepreneurs
This website says,
A lean canvas is an adaptation of Business Model Canvas by Alexander Osterwalder which Ash Maurya created in the Lean Startup spirit. Lean Canvas promises an actionable and entrepreneur-focused business plan. It focuses on problems, solutions, key metrics and competitive advantages.
The “canvas” movement is part of larger trends in the business world
- Agile
- Lean startup
- Decreasing cost of entry
- Seed investment explosion
- Startup “hacking”
Yeah, so it may help to document how you successfully built your machine, get it down to a science so that it’s replicable!
Further more, the Bullseye technique, is a great test tool for hypotheses!
Get the notes I got from the silicon valley sent to you:
I’m freely giving out a hefty package of notes from Silicon Valley CEOs, to MBA’s on how to start a startup.
Over 50 Docs of Notes! (How to Market, Pitch and More in 50+documents)
Author: Natu Myers (Website: Natumyers.com)
Natu is a cryptocurrency investor and software engineer who is experienced in building large scale applications. He built Innovator.Supply, an HR recruiting software for VR, AR, and chatbot enthusiasts. This was followed his other service, Hypetroop Market. He has a fitness page on Instagram. Stemming from his time at Queen’s, he was a defensive lineman on the Queen’s Gaels football team. Being a multipotentialite, he finished a business incubator program after graduating, launched his own album on iTunes, and he stays up to date industry-penetrating software startups and crytocurrency investment methods while gaining IT experience.
