multisided platforms, also known as multisided markets or bilateral markets, are business models that facilitate interactions between two or more distinct groups of users – and that provide networking benefits to each other. these platforms often act as intermediary agents, allowing different groups of users to connect, interact and exchange goods, services or information.
the platform’s value increases as more users use it, creating a network effect. when one side of the network grows, the entire platform is valued, triggering exponential growth for all businesses that operate on it. for example, the more buyers and sellers use an e-commerce marketplace, the more valuable the platform becomes to both groups, as there are more opportunities for transactions to take place. this, in turn, can drive even more users to the platform, creating a virtuous cycle of growth.
how platform businesses work based on basic marketing principles: supply and demand, providing the best possible interaction between these two sides is one of the crucial elements for the success of a platform business model. multisided platforms include online marketplaces like ebay and amazon, social media platforms like facebook, and ride-sharing services like uber and lyft.
multisided platforms work by facilitating interactions and transactions between different groups of users. the main objective is to offer significant value to users, allowing them to benefit from the generated network effects and reducing transaction costs. for this to happen, they:
connect groups of users: the main function of the platform is to connect different groups of users with mutual interests. for example, on a ride-sharing platform like uber, the user groups are passengers (who need transportation) and drivers (who provide transportation services).
reduce transaction costs: by acting as an intermediary, the multilateral platform reduces transaction costs associated with locating and connecting with the desired group of users. they often provide tools, services, or features that make it easier for users to find, communicate, and transact.
create network effects: multilateral platforms benefit from network effects, which means that the value of the platform increases as more users join each group. a larger user base attracts even more users as the platform becomes more useful and valuable to each group. for example, more sellers on amazon attract more buyers, and more buyers, in turn, attract more sellers.
develop pricing strategies: pricing plays a crucial role in multilateral platforms as it affects the balance between different user groups. platform owners can employ various pricing strategies, such as subsidizing one group of users to attract more users from the other group, or charging different fees based on the value generated for each group. for example, a dating app might charge men more than women, or an online marketplace might charge sellers a percentage of each sale.
seek to provide trust and security: to maintain a healthy ecosystem and ensure user satisfaction, multilateral platforms need to establish trust and security mechanisms. this may include user verification, rating and review systems, dispute resolution procedures and fraud detection.
promote continuous improvement: to remain competitive, multilateral platforms need to innovate and continuously improve their offerings. this may involve adding new features, refining user experiences, or expanding into new markets.
multilateral platforms can also provide companies with access to valuable data about their users’ preferences, behaviors and interactions. this data can be used to better understand customer needs, to personalize their experience, or to develop more targeted marketing strategies by companies .
some well-known examples of multilateral platforms include:
online marketplaces like ebay and amazon that connect buyers and sellers.
social media platforms such as facebook and linkedin, where users, advertisers and content creators interact.
ride-sharing services like uber and lyft, which connect drivers and passengers.
payment platforms such as paypal, which facilitate transactions between buyers, sellers and financial institutions.
dating apps like tinder and bumble that connect potential romantic partners.
the number of platforms and variety of services and products offered has been growing significantly in recent years and causing a real revolution in digital business models. with this also grows the offer of new opportunities for value creation and collaboration between the different stakeholders. to stay in the running and succeed, platforms will need to be agile and adaptable, able to respond quickly to changing market conditions and emerging trends – a combination of technological advances, regulatory changes and shifts in consumer preferences.
designing a multisided platform involves several key steps to ensure that the platform is valuable, functional, and appealing to its target user groups. the following is a general outline of the process:
identify target user groups: begin by determining the distinct user groups that will interact on the platform. these groups should have a mutual interest or complementary needs, which the platform will aim to address.
methods: market research, competitive analysis, and brainstorming sessions can help identify distinct user groups with complementary needs and mutual interests.
who are the distinct user groups we want to serve?
what mutual interests or complementary needs do these groups have?
understand user needs and pain points: conduct research to gain insights into the needs, desires, and challenges faced by each user group. this can involve surveys, interviews, focus groups, or other forms of user research.
methods: conduct qualitative research through interviews, focus groups, and contextual inquiry, as well as quantitative research using surveys, questionnaires, and analytics data to gather insights into each user group’s needs, desires, and challenges.
what are the primary needs and desires of each user group?
what are the main challenges or pain points that each group faces in their current situation?
define value proposition: based on the research, establish a clear value proposition for each user group. this should highlight the unique benefits the platform will provide to each group, and how it will address their needs and pain points.
methods: use the insights from user research to develop value proposition statements and create personas for each user group. tools like the value proposition canvas can help articulate the unique benefits the platform will provide to each group and how it will address their needs and pain points.
what unique benefits will our platform provide to each user group?
how will our platform address the needs and pain points of each group in a way that sets us apart from competitors?
design user experience: develop a user experience (ux) design that caters to each user group’s needs and preferences, making it easy for them to interact and transact on the platform. this includes designing user interfaces (ui), navigation, and features tailored to each group.
methods: apply ux design principles to create user flows, wireframes, and prototypes for each user group. use tools like sketching, card sorting, and participatory design workshops to involve users in the design process and ensure the platform’s usability.
how can we design a user experience that caters to the preferences and needs of each user group?
what features, navigation, and user interfaces will make it easy for users to interact and transact on the platform?
develop pricing strategy: design a pricing strategy that balances the needs of each user group, considering factors such as market dynamics, competition, and the platform’s value proposition. this may involve subsidizing one group to attract more users from the other group or implementing tiered pricing models based on usage or value generated.
methods: analyze market dynamics, competition, and the platform’s value proposition to create a balanced pricing strategy. use techniques like cost-based pricing, value-based pricing, or competitive pricing to determine the right pricing model for each user group.
how can we create a pricing strategy that balances the needs of each user group and encourages platform adoption?
what factors should we consider when determining the pricing model, such as market dynamics, competition, and the platform’s value proposition?
establish trust and safety mechanisms: develop systems and processes to ensure trust and safety on the platform, such as user verification, rating and review systems, dispute resolution procedures, and fraud detection measures.
methods: develop systems and processes to ensure trust and safety on the platform, such as user verification, rating and review systems, dispute resolution procedures, and fraud detection measures. conduct risk assessments, security audits, and vulnerability testing to identify potential threats and develop mitigation strategies.
what systems and processes can we implement to ensure trust and safety on the platform?
how can we prevent fraud, maintain user privacy, and handle disputes between users effectively?
build the platform: develop the technical infrastructure, software, and tools needed to support the platform’s functionality. this may involve using existing tools and technologies, or custom development based on the platform’s unique requirements.
methods: use agile development methodologies, such as scrum or kanban, to build the platform iteratively, incorporating user feedback and adjusting the design as needed. leverage existing tools, frameworks, and apis to accelerate development and ensure the platform’s scalability and performance.
what technical infrastructure, software, and tools are required to support the platform’s functionality?
how can we ensure the platform is scalable, secure, and performs well under various usage scenarios?
test and iterate: conduct usability testing and gather feedback from target users to identify any issues or areas for improvement. use this feedback to refine the platform’s design and functionality, iterating as necessary to optimize the user experience and value proposition.
methods: conduct usability testing with target users, using techniques like think-aloud protocol, heuristic evaluation, or a/b testing to identify issues and areas for improvement. use the feedback to refine the platform’s design and functionality, iterating as necessary to optimize the user experience and value proposition.
how can we involve target users in the testing process to gather valuable feedback and insights?
what usability issues or areas for improvement have been identified, and how can we address them in the design and functionality of the platform?
launch and market the platform: once the platform is ready, launch it to the target user groups, and implement marketing strategies to attract users and drive adoption. this may involve targeted advertising, content marketing, social media campaigns, or other promotional tactics.
methods: develop a go-to-market strategy, which may include targeted advertising, content marketing, social media campaigns, or other promotional tactics. use marketing analytics and user segmentation to tailor marketing efforts to each user group’s preferences and needs.
what marketing strategies and tactics will be most effective in attracting users and driving platform adoption?
how can we tailor our marketing efforts to address the preferences and needs of each user group?
how can we leverage the network effects within our platform to ensure it becomes less reliant on advertising campaigns on other platforms over time?
monitor, analyze, and refine: continuously monitor the platform’s performance, user engagement, and satisfaction. analyze data and user feedback to identify areas for improvement or expansion, and refine the platform accordingly. this may involve adding new features, improving existing ones, or expanding into new markets.
methods: continuously monitor the platform’s performance, user engagement, and satisfaction using tools like web analytics, customer relationship management (crm) systems, and user feedback surveys. perform regular data analysis to identify trends, patterns, and areas for improvement, and refine the platform accordingly.
what key performance indicators (kpis) should we track to measure the platform’s success and user satisfaction?
how can we use data analysis and user feedback to identify areas for improvement, expansion, or innovation?
by following this design process and addressing these questions throughout the design process, you can create a multisided platform that effectively connects different user groups, addresses their needs and pain points, and generates value for all parties involved.