Launching a Two-sided Platform
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Two-sided platforms, such as Airbnb, Uber and eBay, have all revolutionized their industries. Despite having colossal potential, they are very difficult to launch. This is due to what s referred to as network effects, which imply that the value of the platform becomes larger as more people use it. Network effects lead to a chicken-or-egg-problem , where it is difficult to convince sellers to join if there are no buyers and vice versa, in addition to the need to reach a critical mass of users on the platform for it to start growing sustainably. Despite these unique challenges for two-sided platforms in the launch phase, current literature has mainly been concerned around established firms. Thus, the purpose of this master thesis is to investigate how two-sided peer-to-peer transaction platforms can reach critical mass. Based on existing literature, the authors have developed a theoretical framework that will guide the data collection and analysis. To answer the purpose, the authors have formulated two research questions based on the theoretical framework: 1) How can a two-sided platform attract users? and 2) facilitate interactions between them? To find answers to the research questions, a qualitative approach has been chosen, with a multiple case study as research design. Six two-sided peer-to-peer platforms were selected, of whom two had successfully reached critical mass, two were still in the process, and two had failed. These were chosen to be able to look at similarities and differences between those who succeeded and those who did not. The case data was acquired through in-depth interviews with the CEOs, secondary data sources and observations of the platforms services. Within-case and cross-case analyses were then conducted to analyze the gathered data. The study has found that defining a category and geography focus is important both to attract users and facilitate interactions, as it allows the platform to create the same characteristics as of a large market. A range of different user acquisition tactics can be employed, but the seeding strategy where the platform e.g. adds supply themselves is often used. This starts a positive feedback loop, where new users have are more likely to join the value creation. The study shows that it needs to be frictionless for users to start using the platform, and building trust and removing risk is fundamental. In contrast to previous literature, it seems that it possible to have an unbalanced growth to reach critical mass. By focusing solely on building supply, the other side eventually wants to interact. Some platforms ability to accumulate supply, seemingly makes this easier. Further research should further investigate those findings, as well as how two-sided platforms can create trust on the platform.