On Building a Two Sided Marketplace

Let’s start from the beginning: what is a two sided marketplace?

Answer from Wikipedia:

A two-sided market, also called a two-sided network, is an intermediary economic platform having two distinct user groups that provide each other with network benefits.

In other words it is a marketplace (online or offline) where different kinds of people meet and exchange valuable tangible or intangible goods and services.

Examples of two side marketplaces are literally everywhere and include companies like:

• Facebook
• Uber
• AirBnB
• Amazon
• Booking.com

and many more. These companies provide services that support and mediate the interconnection of groups of people in different manner.

Jeff Bezos gave a talk at MIT the 25th of November 2002 explaining some of the key characteristics of Amazon at that time. At the time, he was looking for new fresh graduates to join his ranks and explained some of features of these marketplaces that are still valid nowadays.

Some key aspects of this talk include:

• you need to help customers to find products and products to find customers. Actually, the second part is more challenging than the first one.
• How logistics is intertwined with computer science in several different ways
• The system needs to works at scale since its inception
• Real time experiments with feedback loop as opposite of batch data mining of the data
• Amazon Web Service was launched in 2001 with the key idea of providing an SDK and a solid API for external users in order to build customizable store fronts
• Amazon Web Services are connected to their affiliate program in order to give a percentage of the sales as commission (or referral fee) to their external developers

The talk also provides a few examples of how developers were coming out with new ways of taking advantage of the internet that they did not expect nor plan. In addition, he explains how extreme customization and recommendation was (and still is) an important feature of the system.

Clearly, there is much more to say about building a two sided marketplace and how various technologies evolved since then. However, this is a good start as an introduction to the API Economy