Building a successful marketplace has some peculiarities compared to building a “normal” product or service-based business. Contrary to popular belief, the hardest part is not necessarily solving the “chicken and egg” problem. It’s finding a “marketplace model” that’s desirable to all parties participating in the long term: buyers, suppliers and the platform operator (you). Most marketplaces fail because the chosen model is not a good fit to the realities of the targeted market. Not being able to solve the chicken and egg problem is then just a symptom of an unfitting marketplace model—not the root cause. On a high level, marketplaces need to succeed in the same four dimensions as any other successful venture: desirability, feasibility, viability and strategic value. So, what does this mean in terms of building marketplaces?
<p>The 'Network Effect' is a phenomenon whereby a good or service becomes more valuable when more people use it. When a network effect is present, the value of a product or service is dependent on the number of others using it. Over time, positive network effects can create a bandwagon effect as the network becomes more valuable and more people join, in a positive feedback loop. This section will highlight techniques to achieve the critical mass required to achieve this effect and stories about companies that have successfully done it.</p>
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