4 Key Principles to Marketing Two-sided Marketplaces (#1 Will Surprise You)

We can agree that 2 things are true.

#1: Every marketplace (i.e. a business where there are a) shoppers and b) suppliers of services or goods) has a marketing problem.

How? Because as much as it’s easy to get users to your platform, Supply (think Etsy creators, Reddit contributors, and Amazon sellers) will rarely solve itself.

#2: 2-sided marketplaces are the new “It” business model and have massively disrupted products and services as we know it, and for many decades to come.

Ebay. Etsy. Uber. Airbnb. Cavier. YouTube. Tinder. For pete’s sake, Amazon!

I’ve marketed 3 different marketplaces, Emntr, Rover, and Assurance, with each tackling this very marketing problem from 3 different “temperatures”, you could say.

  • Emntr: did little to nothing (cold!)
    • With a nearly inexistent marketing budget, they chose to spend a few thousand dollars on branded marketing collateral (swag), which they would then share with their Supply (i.e. amateur and pro surfers in Hawaii), while their Business Development Manager engaged with hotels to entice them to promote the platform’s service (i.e. surf lessons by surf experts).
  • Rover: did everything! (hot!)
    • Besides understanding the long-term power of search engine optimization and content marketing for bolstering ranking in Google searches, they gladly spent large amounts on paid acquisition while funding their bread & butter channels (Google AdWords, Facebook, and more). After some time, they started to invest in Supply Marketing and seriously think about how to engage & retain their pet sitters.
  • Assurance: does everything and much more (very hot!)
    • They treat their marketplace as a true platform and a large amount of their media spend is reliant on paid user acquisition. Although often not recommended for most startups (CAC in danger of overshadowing LTV), it works for them. As well, they’ve decided to think about Supply marketing very early, which makes for a more balanced consideration of marketplace dynamics.

After my experience of 1) failing to grow a marketplace (Emntr) and 2) successfully helping to grow a marketplace (Rover), I enter Assurance with a strong foundation marketing for marketplaces.

I’d like to share the same wisdom here. Whether you’re a marketer at one of these startups, or if you have the ambition to start your own marketplace (because hell, why not?), and want to set it up for success in growing and blossoming, I hope you’ll find this very valuable.

The reality: marketing will often make or break your marketplace and here’s why.

#1: DAY 1, supply marketing becomes important.

Start with growing and marketing your Supply 1st, and THEN your Demand.

After all, people need a service to buy, right? So fill the marketplace with the product you’re hoping to tout.

This is common sense, but worth calling out immediately.

2nd, leverage paid advertising to grow your Supply base.

There is a lot of low hanging fruit with Google AdWords, Facebook, and even Craigslist, so I won’t go into too much detail here. If you do want to explore some unconventional unique channels, check out our short list.

More importantly, remember to retain & engage your Supply people!

Just like customers, long-term value will be driven from the ones you’ve already acquired, NOT from new ones that stroll in and then walk right out (for example, after poor onboarding, customer support, or user experience).

Once again, this is common sense but still valuable to remember.

And 3rd, as quickly as possible, calculate the CAC (Cost Per unit of Acquisition) and LTV (lifetime value) of your Supply, and your users (Demand).

LTV being viewed as revenue and CAC as cost, your revenue needs to be greater than your cost, in order to turn a long-term profit (see this great article to learn more).

As for media mix, industry benchmarks is that no more than 40% should be paid advertising, and the rest should be earned and/or organic.

As mentioned earlier, there are exceptions but assume yours is part of the standard. Thus, make sure to invest in SEO and PR along with your paid marketing efforts.

#2: Optimiza-whaa? Just trust me.

Not only should you map out the conversion funnel, as in the exact journey a customer (i.e. user) takes in the “Demand flow”, but you should do the same for your Supply people.

It’s important that your customer journey is the perfect porridge: not too long and complicated (too much friction for users), but not too short (you’ll need several “checkpoints” for marketing optimization events).

To expand on the latter, most major ad channels, called Self Attributing Networks (i.e. Facebook, Google, Snapchat), have the ability to optimize their targeting to these deeper “checkpoints” in your flows.

What this really means is that the SAN will begin to target advertising directly to Internet users who will have a higher likelihood of engaging and converting with your ads.

Pretty smart, huh? Finally, be aware that your need to soon start thinking about marketplace economic dynamics, as in what is the balance of Supply to Demand (often called “utilization”), and what levers can you pull to influence this.

#3: Marketing channels WILL surprise, so be open minded.

First and foremost, be open to discovering unexpected marketing channels.

Everyone thinks they know their users and Supply, and where they go to spend time, but are repeatedly surprised at how wrong they are.

Not only that, but be mindful that channels that perform well (i.e. drive a great CPA at a good volume of people), will vary between Supply & Demand.

Just because Facebook ads works for driving users (Demand), that doesn’t mean they’ll work for getting Supply!

Analyze this as objectively as possible.

And finally, when a channel hits a good, consistent CPA (approximate at the start, getting more precise as you feel out unique marketing channels and their best CPAs), quickly considering putting 5-10x more spend behind it to scale it!

That’s ultimately the goal, so grasp the bull by the horns when you can.

That said, don’t put all your eggs (or spend) into 1 basket. While you scale that channel, make sure to have at least 2 other channels running, optimizing to a low enough CPA until they too are efficient enough to scale.

#4: DO NOT be a product-lead startup (at least exclusively).

Your company can and might be a “product-lead startup”, because after all you want to build a phenomenal product that brings a huge amount of value to users, but do not neglect marketing in the process.

Marketing as an after thought is an all too often (and dangerously optimistic) phenomenon and needs to be a constant, proactive effort by the leaders of the company.

I can’t stress this enough.

Marketplaces who do neglect marketing experience painful 2nd and 3rd level consequences (i.e. slow at grasping promising product dev opportunities, which in turn limits adaptability and in turn, hyper growth).

So beware.

A way to mitigate for this is instead of having silo’d departments (marketing, product, engineering in each in their own cluster), to instead create growth clusters of 1 marketer, 1 project manager, 1 data scientist, and 1 developer (i.e. a team who can operate on SPRINTS).

That way, product features can be tested quickly without coders or data scientists becoming blockers.

As a bonus, make sure one of your 1st product features is incorporating easy referral functionality into your marketplace.

That way, the power of virality can take effect in growing both your Demand AND Supply base, as well as create a lot of marketing opportunity for your clusters to test (ex. Supply referring similar Supply, users becoming sellers, and more).

I’ll stop there.

I might be wrong, but a marketplace seems to be an advanced product or service to market because of the ever present and delicate balance of Supply and Demand.

That said, I believe if you follow some of the above, you have in your hands a silver linings playbook for increasing your chances of successfully building, scaling, and establishing a world-class marketplace brand like Uber, Door Dash, or Airbnb.

Believe it or not, these are the same principles they use to achieve massive growth and momentum.

Did you find value in this post?

There’s more to share, specifically in regards to reporting, legal , and creative, but I would like to get a pulse on “Demand” (pun intended) before a “part 2”.

Please comment below or in the Facebook, Twitter, or LinkedIn post! In the mean time, please feel free to reach out if you have any specific questions in regards to marketing your own startup marketplace.*

*NOTE: This applies to e-commerce platforms (think Amazon) as much as it does to sharing economy platforms.


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