And not only Google, Airbnb and nightclubs, but also segundamano, toprural, fotocasa, idealista, eBay, just-eat and a long etc. of online and offline business have it.
Modelos de negocio
What they all have in common is the business model. Every mentioned case is a multilateral platform. These are characterized by bringing together 2 or more different customer sector.
When a client comes to Flat101 asking us to create a website for this kind of business, we immediately explain to them how to deal with the initiation of businesses based on multilateral platforms and the correct way to deal with customer development stages in a new business. Here are some of the keys:
In Google’s case, as a multilateral platform, we have as the first client stage those that are searching for information, us, who turn to it daily to ask anything we need to know. We use this service for free. Thanks to that and to the good results it gives us, every day there’s more people around the world using Google to search on the internet (more than 80% of net users in Spain during 2013, according to netmarketshare).
As soon as the critical mass of this kind of user is reached is when the second client sector begins to feel attracted to the idea of being in Google. Those are the advertisers, who are willing to pay to appear in the search results. It is with this money that Google gets its income and benefits to subsidize and maintain the platform that everyday users use for free. In Google’s case, a third client sector has to be added to the equation but for now, we’ll leave it there.
Airbnb.es is a platform that gets in touch travelers (with the need of lodging in the destination city) with owners (wishing to rent their house, apartment or available room for days/weeks).
In this kind of business model (multilateral platforms) appears the chicken or the egg dilemma, because, when will people search for accommodation in Airbnb? When there are enough properties and price variety, location, etc. And, when will people want to rent out their houses in Airbnb? When there are travelers using the platform. That’s why, when you are launching this kind of business you have to deal with this dilemma and be able to convince enough owners to put their houses up for rent and so after convincing travelers to rent them.
A multilateral platform creates value, allowing interaction between different client groups or sectors.
And this is what single bars, pubs or nightclubs have been doing forever.
Each client sector in a multilateral platform produces a different income source. It is also usual in this type of business model that one of the client sectors is subsidized by another one. (Doesn’t it come to your mind nightclubs where women get in for free?)
In Google’s case it’s the advertisers who pay to appear in the search while users search for free. In Airbnb the traveler pays a fee or commission for renting a place in the destination city (69€ in my last booking). I don’t know if the host must pay something to get the reservation (I haven’t put my house for rent in the platform for now to find out…)
An important and hard decision to take when initiating this kind of business is to know which client sector to subsidize, which one to charge and how much to charge them to keep drawing their attention.
El efecto red
The key to success in this line of business is in your hands because they can draw more users, what is known as the network effect. The more people use the platform, the more value it will get for every part involved in it.
The network effect and the chicken or the egg dilemma are 2 important challenges for business based on multilateral platforms.
That’s why, as we said at the beginning, when a client comes to Flat101 and asks us to create a website for a multilateral platform (although they don’t call it that way), we check with them the project and the keys seen in this post. We afterwards define with them the right stages for launching their business, considering “the chicken or the egg dilemma” and using as a base the appropriate customer development processes.
Something our clients say they value is that, in their own words, we don’t create a website but we get their BUSINESS started, something we feel proud of and that is one of the strengths as a team and as an enterprise.
So if you are going to start up this line of business, you already know what the critical points to keep in mind are, and if you are a user, I’m sure that from now on you’ll be able to recognize straightaway any business based on a multilateral platform.