Why build a platform? That’s a question we wrestled with at Jumo when deciding between building a marketplace platform or continuing our successful mobile credit business. We chose to go platform because we believe it allows for better choices for the consumer. The consumer gets a wider range of products, for better prices, at anytime. But we didn’t know that much about the supply side. We thought we could convince several supply side businesses to plug in. The actual result is far more successful, and that was a crucial lesson early on for us. We built the demand side of the equation, but still didn’t entirely believe supply would come through. It did, and in abundance. The platform equation is like an algebra problem where you need to solve for two variables. You cannot solve for both with a single equation, you need two separate linear equations. And only then, after you solve for one, can you solve for the other. So what are the different ways you solve for one side? A platform on its own has no intrinsic value.
In Sangeet Choudary’s Book Platform Scale he writes that main ways to build out a platform are:
- Finding a compelling bait to start the loop
- Ensuring there is no friction in the feedback loop
- Minimizing the time it takes the company to reach critical mass
- Incentivizing the role that is more difficult to attract
- Staging the creation of the two-sided marketplace
At Jumo, we mostly followed the fifth strategy. We created one side of the marketplace, and then opened it up the other side. This worked extremely well for us. Facebook, on the other hand, built their platform using the first strategy. Their bait was allowing college students to meet other college students. That was perfect for the millions of students arriving at college, or already there, wanting to be friends. It’s important to note that platforms don’t need follow just one strategy. Most successful platforms follow a couple, and try whatever they can to acquire consumers on each side. Do whatever you can to win the game. Platforms become massively valuable, and that’s a nice benefit of solving problems for consumers.