People helping people – it’s a beautiful thing. Over the past decade, the sharing economy has exploded allowing people to more easily monetize the idea of sharing, which is known today as collaborative consumption. Much of this evolution can be attributed to the advent of two-sided marketplaces.
Two-sided marketplaces, also referred to as two-sided networks, are economic platforms that have two specific user groups to provide benefits to one another. Instead of users relying on brokers to facilitate the transaction, technology has enabled suppliers to directly connect with consumers- cutting out the middleman. Although these marketplaces benefit both the buyers and the suppliers, they differ from traditional buy/sell economics in that both parties are considered customers. Instead of a company focusing on one customer group, a two-sided marketplace provides a platform that enables customers to work and communicate directly with suppliers.
In these marketplaces, both the customer and the supplier benefit financially by eliminating the middleman and reducing the overall price of goods. However, in addition to this, suppliers are able to mass market their product or services, while customers can take advantage of a cross-side network effect – meaning competition between suppliers drives prices down.
While some of the classic examples include yellow pages and recruiters, this concept has evolved to online marketplaces and search engines through the growth of technology. Users can access these software applications via computer, tablet or smart phone allowing more users to access the platform more frequently. Some of the largest software companies in the world are two sided marketplaces including: eBay, Amazon, Match.com, and even Google.
If scaled properly, these marketplaces can be incredibly successful, however they can be tough to put together because they are the classic example of the chicken and the egg dilemma. In order for the suppliers to be interested, you must have a large customer base, and in order to get a large customer base there must be a substantial amount of inventory. Think of a Match.com without women, or eBay without any sellers.
Trulia – the online real estate service – is a two-sided marketplace that connects customers seeking homes or rentals with professionals and landlords who are promoting these properties. Today Trulia has 31 million users and for many has become the go to place when seeking a rental property or a property to purchase.
This idea doesn’t stop at sales and long-term rentals. AirBnB, an online marketplace that connects underutilized houses and apartments and connects users to stay for a limited period of time, has become a major marketplace for people anywhere. AirBnB takes a booking every two seconds and there are now more than 300,000 rooms, apartments and houses listed worldwide.
In the travel and transportation sector, two-sided marketplaces have become a popular tool for travelers. Flightcar is the first company to establish a marketplace that allows vehicle owners parking at the airport to rent their cars to other travelers. Yachtico is an online marketplace featuring over 15,000 sail boats, motorboats, catamarans, houseboats and yachts on its international platform.
Rent one of Yachitico’s 15,000 rentals
In commercial aviation, online travel agencies (OTAs) have become a popular destination for travelers to search, compare and purchase flights. Examples include Kayak, Expedia, Hipmunk, Orbitz and Priceline, which all allow customers to compare flights from various vendors. Although there has been a growing movement of passengers booking through airline websites, 33% of travelers booked flights through OTAs in 2013.
One market that has yet to establish an efficient two-facing marketplace is private aviation. Fresh Jets is a two-sided private jet marketplace that matches businesses and corporations with charter companies’ excess capacity. Interested in learning what all the hype around private aviation is? Find out for yourself here.
This article was written by Johnny Sengelmann, co-founder and COO of Fresh Jets. Fresh Jets aggregates private jet schedule and pricing information in real-time matching inventory to the travel needs of businesses and individuals instantly.
