How To Build A Two-Sided Marketplace | Dan Martell
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How To Build A Two-Sided Marketplace | Dan Martell


– Building a two sided market is probably the hardest thing you can do. A few weeks ago I organized a market place founders dinner. Because I felt like there needs to be almost like an AA meeting type for those founders that have decided to build marketplaces. You know, like, and I
don’t know if you know what a marketplace is but
like and Etsy or an Ebay or Clarity, my startup. It’s where you build a platform
and you hope that people on the supply side and on the demand side come together to complete a transaction and get a lot of value from that. And the reason why it’s so challenging is you’ve got both sides of
the market to figure out. When you build a normal technology company or you build any busines, you have a customer and you have a service and you deliver it. But with any marketplace you have that same concept times two. So, what I want to talk about is how do you do that effectively. I can only speak from my experience. I don’t know if you’ve
checked out clarity, But clarity.fm where
marketplace for entrepreneurs to get advice from experts, real world experts with experience, over the phone. To grow their dreams
and businesses forward. And we’ve completed over 250,000 calls in the last 18 months. It’s been growing 30
percent month over month. It’s really taken on. And the challenge though
is in the beginning, is getting the fly wheel going, right. I mean everybody that’s tried to start they always say like, in the
beginning how do you start? Here’s my suggestions to you. Number one, focus on one use case, right. So, for us it was marketing as a topic but also within marketing SEO. So, if you’re doing a
vacation rental site, like an airbnb, VRBO, or Homeaway, maybe you would start with treehouses. Now that sounds crazy. But you might even start
with treehouses in Europe or even within a specific city in Europe. But really focusing on
a very focused use case and even a product set, helps
you streamline the experience. Because if you’re trying
to do too many things within a broader market and something’s kind of taken off, it’s really hard to
understand what is working. Once you know what’s working, then you can add on or
stack on, as I like to say. Stack on is different tan gentle market so we started off with SEO in marketing and then we added other types of marketing like Facebook marketing, growth hacking, online marketing and content marketing. And then from that,
from a marketing bucket, we then tacked on business
development then sales. And we just kept expanding and expanding, whereas two years into it almost we have different, we have
four thousand categories and a bunch of different topics. That’s the way I believe to start, by building a very focused use case, focused on doing one thing really well and making it niche. Sometimes people call it
uncomfortably narrow as a niche. So, try to think, am I
really uncomfortably narrow as how specific this
marketplace deliverable is. The other thing that I would say is focus on the demand side. You know, a lot of people
they think ok well, I want to do this kind of marketplace. I need a bunch of supply and supply is the people
delivering the service. If it’s buyers and
sellers, it’s the sellers. And I would argue that
it’s better and easier if you focus on narrow
offering, to fake the supply or essentially pay the supply to be there. I mean Uber was famous for, you know when they started their black car service they didn’t have ten thousand
black cars signed up day one. They went to a company and said, look, you’ve got twelve cars. How about I pay you to
just have them respond to these messages on this
iphone app that they gave them. And then that black car
service would just tally up all the drives and send them one invoice. And that was the beginning of Uber, now a multi-billion, I
think they just raised that, 60 billion dollar valuation. Companies started with that same concept. So, fake the supply or restrict it to a very specific use
case, where you can control and deliver on that promise and focus on the demand. Focus on finding the ideal
customer that has that use case that need, for your marketplace. You know, those are the two big things. And then the third thing I’m gonna say is I believe the world has
gone from a 1.0 version of a marketplace, to a 2.0 to now what we’re in a 3.0. And a 3.0, well, I’ll start with a one. One was Ebay, one was Craigslist, where It was kind of a free for all. A 2.0 is more like a curated, very focused marketplace. with identity and privacy and trust. Which would be more like
an airbnb or an Etsy or kind of like where they’re
leveraging social trust to build liquidity in the marketplace. The third kind is what we’re seeing now where essentially they’re
fixing the supply side of what you get. And that would be Homejoy
for home cleaning services, Uber and Lyft for delivering, where I guess the way to look
at, is they set the price. Whereas, in Taskgrab it
would be a 2.0 example. But a three is where you say
look, this is the offering. This is what we deliver on. We own that brand, that consistency. Those people might be contractors
to us on the supply side. But we will own the experience. We will be responsible for that and the price is fixed. So, there’s this consistent ever going … I mean another example will be Fiverr. When you go to Fiverr,
it’s like the name says it. How much is it gonna cost? It’s five bucks, whatever you want. So, FIverr is an example of a 3.0. If you haven’t checked out
FIverr you gotta do it. I mean, you’re gonna probably
spend the next three hours … If you haven’t been there, start watching some of the crazy videos. But, Fiverr is an example
of, here’s an example … A 2.0 version of Fiverr would be oDesk. But what they said is look, no, we want to reduce the
friction and build liquidity. And they said everything’s five bucks. Everything’s bought in this format. You know what you get. The person’s offering
is exactly that thing. And when you take the first, all these strategies put together, it really helps you build a
marketplace with liquidity. One, focus on a very uncomfortably narrow niche offering. Two, focus on the demand
side versus the supply. And then third, figure out are
you a 2.0 or a 3.0 offering. And it’s even easier sometimes to go three and maybe back to a 2.0. Anyways, those are my ideas
on how to build liquidity in a marketplace is challenge
that a lot of entrepreneurs and founders are facing right now. And I hope that brought value
to you, leave a comment below. If the number one take aways
you got from this video and I hope that you continue
to growth stack your success and you live a passionate life. Have an amazing day!

51 Comments

  • Yazin S

    Loved the 1.0 / 2.0 / 3.0 explanation Dan — I never thought about it that way! Reminds me of a saying by one of the Kickstarter founders: "If you find yourself stuck in a chicken-egg scenario, fake the chicken!"

  • Raymon van der Velde

    Morning Dan! First off it's scary how you pick these topics… Within my startup we're working on 2 propositions, you guessed it one is a two sided marketplace. You 're really making me think this morning…

    Niche: with ya on this one.
    Demand: i am focussing on supply because this is already a niche market and I want to be the quick to secure supply. It makes sense what you've explained, i'm gonna noodle on this one… (maybe both… need more time Argh!)
    1/2/3.0: great new insight, gonna take this one to the whiteboard

    Till next week, have a great weekend!

  • Devin Heiner

    Love how you actually run through examples of each marketplace type (1,2, &3) and how they all relate; it definitely helps paint a picture. Thank you

  • Andrew Korf

    Great post. Who do feel is doing the best job on "curation" an area of interest of mine… as in lead with curation, set the tone of the marketplace through curation, then let the flowers bloom. The RealReal got this right for womens clothes, poshmark on the other hand has dropped the ball according to my fashionista wife… thoughts? Who else nails the curation side of things? 

  • Aaron Afrifa

    This is the exact advice i needed. I've been feeling lost for the past two months. Is there a way i can speak to you. I would truly appreciate it.

  • rocketpark

    Great vid.
    Yep, we're building a two-sided market place. What I'm trying get tips on is, how do you pitch a two-sided market place business/app to investors. How do you explain the 2 problems, and the 2 solutions, in a pitch that barely leaves time to explain a single market. I've already had some investors say "oh no, not a two-sided market place, good luck with that".

    But there are so many of them around, and many successful ones, why so risk averse? Would I be safe in assuming traction was key element to these "successful" two-sided market place businesses raising capital?

  • Fida Rana

    Dan, great video. Thanks a lot. One quick question, is there any recommended freelancer or web development company who specializes in developing marketplace ?

  • olddayallstar

    Great vid and great advice. How about Pinterest ? Is it also two-sided market ? But when it got started, I think they promoted to the heavy Pinners only. They did not promote much to the average users who just browse but not pin

  • Nick Artunyan

    Thanks for the video! Question: When you said focus on the demand side first, would that also be a good suggestion for version 2.0? When you don't have the supply side how would you approach the demand?

  • Flying Geese

    Great vid Dan and it was very well explained. I definitely agree with you that a marketplace startup is definitely among the hardest ventures. Clearly you've done your research on this business model! Looking forward to checking out more content from you. Thanks!

  • Jaret Stavrouss

    Thanks for the video, it was insightful. I did have a doubt what is the difference between a 2 and a 3 sided marketplace.

  • Jake Tunney

    My free fitness marketplace, GiveFit, is uncomfortable niche (free fitness in Baltimore, atm). If I'm a 3.0, where I have to curate supply, is it enough to understand that demand is contingent on the availability of supply? I'm working in a highly supply-constrained environment, where demand has largely been demonstrated. Is it reasonable to conclude that if I can hack the supply-side, to the right type of supply, we can deliver the demand? When you say focus on demand, what would that mean in my case?

  • Mailbnb

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    If you’re lucky enough to have known the analog world and watched its transition then you are quite familiar with the feeling of tracking down a payphone to collect-call your mom to pick you up from the beach. Or, trusting that someone you hadn’t talked to in three days will remember you had plans to meet.
    In a short timeframe the advent of the mobile phone evolved into the smartphone giving rise to a high powered, connected computer in your pocket. This created a new world, a new economy, and a new way of doing business – drastically slashing all former barriers to entry.Crushing Obstacles To SuccessStarting a business or generating a freelance income on the side has never been as easy as it is today. With websites being the new storefront you are no longer hampered by large overhead costs. However, even websites have become unessential. A new economy has sprouted in the last decade allowing individuals to lease to others the resources they already own and use every day, all with a single tap.
    Lyft and Uber have brought convenience back to transportation in crowded cities with an on demand, private car delivering you from door to door with only a few minutes notice. Airbnb upset the hotel industry by allowing residents to sublease their houses, apartments, rooms, and couches to weary travellers and tourists.
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    This is where you come in!
    Airbnb, Lyft, and Uber all have something else in common. In order to earn, you – the service provider – have to be willing to accept a level of inconvenience. You have to give strangers access to your most personal spaces. But with Mailbnb, you can earn just for having a business address.
    Mailbnb is a way to make money wherein you never have to meet face-to-face with those paying you and most importantly you won’t be put out of your office. All you have to do is rent your prestigious address to a professional in need and forward them their mail. No marketing, no sales, no negotiation. List. Rent. Send.There Is No Limit To The Income You Can GenerateThe obvious benefit to Mailbnb that other marketplaces don’t offer lies within its inherent scalability. You can only drive one car at a time or lease your house to one guest at a time, but with the digital plasticity of Mailbnb you have no limit to the amount of virtual guests to whom you can simultaneously rent.
    Your business address suddenly transforms into a cash minting machine that makes you money whether you’re at work or not. It frees you of punch clocks while adding a little more financial security to your pocket book.
    Mailbnb gives you a way to make your office space work for you. You can eliminate the monthly costs tethered to leasing an office while concurrently helping an entrepreneur establish themself within a market, boost their professional image, and save on costly business expenses.You Are Always In ControlFrom the term lengths you choose to offer to the fees and types of mail forwarding you will implement, you get to choose. You are in control of everything, and you can offer as much or as little as you are willing to provide to your virtual guest.
    Do you have a meeting room you’d like to add as an upsell? Done! Would you rather not have people come into your place of business to pick up mail? Just deselect the option and you will never have to lay eyes on a virtual guest if you so choose.
    Mailbnb is dedicated to helping you succeed. There is an ever growing demand for mail forwarding and virtual office services. As the telecommuting workforce increases, as businesses are established solely in cyberspace, as entrepreneurs continue to innovate from their garages, the demand for these essential business solutions will escalate. It’s not too late to start capitalizing on your untapped resources and position yourself to profit as the industry flourishes.Now Is The Time To StartAs our world becomes increasingly digital it becomes easier to profit from new opportunities and previously unrealized sources. As the digitization of the classic workspace takes root, the remotely operating workforce will require these services to provide a much needed physical presence to their businesses.
    Mailbnb makes it easy to eliminate your traditional expenses associated with leasing office space by listing your business address on the platform and allowing professionals just like you to benefit from your prestigious location.
    Without any additional effort, you can benefit from a new way of earning that you may not have previously thought was an option.  Mailbnb makes you the link between the digital and the physical universes.

  • Lynn Financial, LLC.

    Thank you for the tip to narrow your focus to begin with. I am uncertain that my niche is "uncomfortably narrow' like you say in this video, but it is good to be validated by an expert that this is a good way to start.

  • Tom Psillas

    You hit the nail on the head Dan. I started www.wetcrow.com, which is a hybrid 2.0/3.0 version of a marketplace. We are focusing on top 20 categories in one metro area first, then expand from there. We target suppliers first, talk too them, build out infrastructure to support how they work best, then generate customer traffic, sell that traffic and pay our suppliers.  We expand verticals in that metro area and when at 500 categories, we move to a new city and repeat signing suppliers and market to customers. Infrastructure is done. After 5 to 10 metros, we scale out more verticals and sign up suppliers in all metros we serve.Having only one vertical is difficult in the beginning, because you can go out of business before you scale out to multiple verticals. In our case, we can now cross sell customers in each metro area. The key is for us to be agile in software development, signing up suppliers, then emailing customers in each metro.

  • Jim Murray Jones

    Good video. Having worked on a number of marketplaces myself, I would suggest an additional factor to consider is the value-adds (bells and whistles) that you provide sellers in order to: 1. Lock in their loyalty / ongoing spend 2. Raise barriers to entry for competitors; making it hard for new entrants to compete on a pure advertising level alone.

    Brands like autotrader.co.uk did this very well in the UK – providing stock management tools, dealer web sites and business intelligence tools that entrenched the bond dealers had with Auto Trader as a platform.

  • Tobin Ansong

    Great video, whats your opinion on building a two-sided market for an app that helps people find popular bars/clubs?

  • dubi186

    really good video. I want to develop two way marketplace but don't know where to start! no knowledge of coding and web development.

  • Pardeep Kumar

    Hello,
    Great content! Learned a lot. You look quite professional and experienced.
    Can you share views about Codexclub – https://www.codexclub.com/managed-marketplace/
    I liked there offer but still not sure. Can you please help or suggest which platform to use?

  • NourishedHub plantbased medicine cures

    Can I get someone who can give me specific information on how to get sellers in my supplements and herbal market place?

    This is my email address : [email protected]

    What'sapp :+2348159987444

  • So Many Errands

    SoManyErrands.com is a two sided marketplace connecting Employers with Errand Runners. Its been really challenging to build a community. Thank you for the tips in this video

  • Michael Fensterstock

    Awesome video, definitely need some type of "AA" for marketplace building – it seems as though the spend can be limitless. Trying to bring the storage and swap shop model into 2018 with a great digital interface and amazing customer service with www.bathwaterkids.com – would love your initial thoughts on strategy. You concluded by advising us to tackle a niche, which we are…but is it too niche?

  • Peter John

    Multi vendor marketplace software is best and it comes with free source code,multi domain with while label product Visit https://www.pofitec.com/multi-vendor-shopping-cart-software

  • Peter White

    Hey Dan. I wanted to see what would be your opinion as far as choosing a free lancer or a company for building a site such as ebay or amazon? 3k or 15k? Thank you

  • Sp Sp

    What about the fatal flaw for the rest of us mortals: coding. What white label platforms do u recommend for the noncoders but with savvy business skills.?

  • Phil Chatterton

    How do we define what an uncomfortably narrow focus looks like? For us, our focus is on B2B communities and 3 specific verticals … but is that narrow enough? We focus on connecting Enterprise SaaS buyers with Enterprise SaaS sellers. Our vertical focus is on financial services, education, and tech companies. But is that too broad?

  • harshal lonare

    Thanks Dan, Would you comment on a new SAAS based service for selling event tickets online. We just want to be active in UK but there are many other providers. How should we go forward with it? https://www.bylde.com/

  • Andrew Horowitz

    Hey Dan! I am looking to build out a functional alpha version of a platform – any ideas of tools / templates to use? I have engineers to build out long term in house, but initially we want something to prove the concept WORKS first?

  • Phil Pask

    Hey Dan, great video. I’m soon to be launching a marketplace for vacation rentals owners to advertise their deals and guests search for a great vr deal. I started a Facebook group connecting vr owners to guests, I noticed how popular these types of groups are and mine has grown to over 4000 members. So decided to build a marketplace. The supply side is initially coming from my own fb group and I’m using social media and micro influencers to build brand awareness and get the message out on the demand side. Revenue will be earned by a saas model, charging owners a monthly subscription.

    I would be interested in your thoughts.

    Thanks Phil

  • Vani Kumar

    Excellent video Dan! All of your tips were very useful. Excited to apply them! I am hearing more about the importance of building a community for your marketplace. Do you have anything to add on this? Is a FB Group the best way to go? Reddit? Thanks for your channel!

  • Mehbs Remtulla

    Great tips Dan. I am involved in start up …a 2-sided digital marketplace where we are trying to help "Transitioners" (55-75 year old professionals) lead an engaged, productive and purposeful life in what is their "third act" of life! We are looking at engaging a digital strategist who can help us plot out a strategy for this venture. Any suggestions, advice or connections you can make would be appreciated. Thanks

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