Matchmakers Part Two: What successful multisided platforms do differently

September 26, 2016 Saas & Platforms
David Chau
By David Chau, Marketing Associate
David Chau
By David Chau, Marketing Associate

Many of today’s most valuable public companies and startups are matchmakers—multisided platforms that connect buyers and sellers. While the concept of a matchmaker business is not new, today technology is enabling such businesses to achieve massive scale. What does it take to build a successful, technology-enabled matchmaker business?

Karen Webster, CEO of Market Platform Dynamics and PYMNTS.com and David Evans, Economist and Author of “Matchmakers: The New Economics of Multisided Platforms” explore this topic in a series of weekly podcasts.

Recently they spoke with WePay CEO Bill Clerico. As payments partner to the platform economy, WePay has a ringside seat for observing the challenges and successes of such companies. Yesterday, we shared an excerpt of the discussion (link) on some of the unique payment challenges of platforms. In today’s excerpt, Bill speaks on what successful multisided  platforms do differently. The full podcast is available here.

David: You’ve observed the development of these multi-sided platforms over the last few years. What has surprised you and do you have any insights into exciting things that are happening in the platform space that other people may not be aware of?

Bill: One of the things that’s really surprised me over the last year is, we all read about the extremely large marketplaces, the Airbnb’s and Uber’s and Amazon’s of the world. But what’s really interesting to me is software products companies that are adding platform-like functionality.

I’ll give you an example. One of our customers is a platform called the Lupulin Exchange. It’s a multisided platform for beer brew houses to exchange hops and other brewing ingredients. This is a business-to-business platform that built a software product for brew houses, and now it’s adding this commerce element to allow them to transact on a network right in the platform.

We see this in all different kinds of verticals. It’s these small software companies adding platform-like functionalities to strengthen their relationship with their customers and add value, and it’s fascinating. I think this sort of matchmaker concept is going to make its way into almost all software over the next 5 to 10 years, and I think that’s a pretty exciting trend that gets overlooked.

Karen: Are there differences that you’ve observed in the software platforms that are connecting businesses with other businesses and those that are connecting a business with a consumer? Are there differences that you’ve observed in how they operate, what their requirements are, that are worth noting?

Bill: We think a lot about the size of the end seller. On one end of the spectrum you have GoFundMe, one of our customers that has tons of consumers that are raising money and acting as sellers. Ease of on-boarding and having great customer support, that really is what matters to that part of the market.

On the other end of the spectrum you have platforms that serve much, much larger merchants, and there it’s about reporting. It’s about connecting to their existing ERP systems.

Karen: Are there matchmakers that pop to the top of your admiration list, those that you think have really just gotten it right on every dimension in terms of the customer experience and the ability to manage all of the endpoints that need to be managed when you’re a matchmaker?

Bill: The Lupulin Exchange is a great example of applying the platform business model to a market a lot of people would overlook. We have tons of customers that are exactly like that. Another one of them is called Time To Pet, which is a software company that serves pet walkers and pet sitters and helps them, not just manage their business, but also get new business.

Then, of course, there are our larger partners, the Freshbooks and Infusionsoft’s of the world, that are really building a tremendous user experience around humans and allowing merchants to have a seamless on-boarding process that really helps drive loyalty to their platform. A lot of our customers I really admire.

Then of course, there are the large, really successful platforms that we all know. Uber has completely upended an entire market over the span of a couple years, which I think is just a tremendous demonstration of the power of network effects. They’re probably one of the ones that I admire the most.

David: Have you drawn any lessons on what problems platforms run into that typically leads them to fizzle out?

Bill: Where I see platforms struggle is they launch their product and they just sort of expect that both sides are going to come and take off and be healthy, and that’s really challenging. There’s no reason for that first buyer to sign up before you have a community of sellers, and there’s no reason for that community of sellers to come until you have a community of buyers. How do you crack that chicken and egg problem? Where I see the less successful platforms struggle is in trying to crack that without really a clear strategy.

What the good platforms solve for that is that they start by building a utility or tool, and then they build the network functionality on top of that, and the tools attract the sellers or the suppliers, and get them started. They can immediately get value from the product without the buyers, and then the network functionality comes on.

I think a great example of that is Airbnb. Airbnb built tools for hosts to post pictures of their listings, to create a really nice listing page. Airbnb would actually come and photograph the listing and help hosts publish that listing to Craigslist and Facebook and these different tools, so it was immediately valuable for the host. And they used that utility, that tool, to seed their ecosystem with suppliers. And then, as that community of suppliers grew, they were able to attract buyers.

I think the best platforms find ways to offer immediate value to suppliers before the buyers even come, and then use that to attract the buyers.

David: Yeah, I really agree with that.

Karen: Is that why you’re so bullish on software as the matchmaker opportunity going forward?

Bill: You hit the nail right on the head. I think these software products offer immediate value. They immediately appeal to a community of sellers. And so, as they think about how to turn that into a multisided platform, they already have the sellers, so how do they then start to attract buyers and build that part of the network?

There are some really interesting things that software companies can do to build that part since they have this engaged community, and so that’s why we think that small business software is a really interesting space for us to play in, and we think where platforms are going.

About the author

David Chau

David Chau, Marketing Associate

David Chau is a Marketing Associate at WePay.

More blog posts by David Chau