Four Questions Every Marketplace Startup Should Be Able to Answer

Marketplace businesses can be messy, and every gain is hard earned. After all, you’re dealing with an ecosystem of participants — buyers and sellers — that’s constantly in flux, their needs and desires changing over time. Unfolding in both online transactions and offline interactions, marketplaces are organic and dynamic.

Marketplace leaders need to be experts in the dynamics of their platforms. Identify those dynamics in the early days, and you can position yourself to build an enduring and deeply liquid market that creates competitive moats. Four key factors shape every marketplace: network effects, type of supply, incentives, and size and frequency of interaction.

Understanding those factors — and structuring your platform accordingly — can make the difference between a wildly successful marketplace and one that never gets off the ground.

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