I would also argue that the value of a network is not exclusively getting new users but facilitating the value that the platform/marketplace is intended.
For example, if either side of the platform/marketplace was to grow, it may not necessarily mean that the quality of valuable interactions (network value) grows in proportion. A classic example of this is a dating platform or something like udemy or upwork.
In such cases, it is usually best to assess the actions that users take on the platform/marketplace to see if they are negative network effects. An example of such, is allowing a listing with poor quality onto the platform which in turn signals to other participants the low barrier to getting in front of users on the other side of the platform/marketplace.
Marketplaces shouldn't necessarily suffer from a degrading experience as the vendors increase. It wouldn't be the case if the administrators have the right filters in place to surface the right offerings to the user.
Also, a robust user-reviews & rating system helps quality vendors show up at the top of user search results.
In the case of a 2-sided market, the network effects are exponential when supply & demand are congruent. 3-sided marketplaces are still sussing out where the value of the network lies, in the case of delivery its the hyper-local network effect but as its scales, the economics become upside down.
I liked this article. At the end, I felt like there was a "wrap up" that was missing. the "now what do I do with that information?"
I think it would have been nice/ helpful to wrap it up for me. Maybe I'm thinking of starting a marketplace. What do I do with this information (besides feel overwhelmed at the information and potentially stop the development of my idea)? I might be trying to understand why a marketplace I enjoy using operates the way it does. Either way...I'd love a wrap-up or bow on the end of the article.
I would also argue that the value of a network is not exclusively getting new users but facilitating the value that the platform/marketplace is intended.
For example, if either side of the platform/marketplace was to grow, it may not necessarily mean that the quality of valuable interactions (network value) grows in proportion. A classic example of this is a dating platform or something like udemy or upwork.
In such cases, it is usually best to assess the actions that users take on the platform/marketplace to see if they are negative network effects. An example of such, is allowing a listing with poor quality onto the platform which in turn signals to other participants the low barrier to getting in front of users on the other side of the platform/marketplace.
Marketplaces shouldn't necessarily suffer from a degrading experience as the vendors increase. It wouldn't be the case if the administrators have the right filters in place to surface the right offerings to the user.
Also, a robust user-reviews & rating system helps quality vendors show up at the top of user search results.
In the case of a 2-sided market, the network effects are exponential when supply & demand are congruent. 3-sided marketplaces are still sussing out where the value of the network lies, in the case of delivery its the hyper-local network effect but as its scales, the economics become upside down.
Thanks for the insight Ze, appreciate it.
I liked this article. At the end, I felt like there was a "wrap up" that was missing. the "now what do I do with that information?"
I think it would have been nice/ helpful to wrap it up for me. Maybe I'm thinking of starting a marketplace. What do I do with this information (besides feel overwhelmed at the information and potentially stop the development of my idea)? I might be trying to understand why a marketplace I enjoy using operates the way it does. Either way...I'd love a wrap-up or bow on the end of the article.
Thank you for feedback Tumi. The article could have been more balanced with a concise conclusion.