Creating a 2-Sided Marketplace with Liquidity

Source: Venture Beat, Nov 2012
(read source for more details)

What is liquidity hacking?

It’s the strategy and tactics that successful marketplace businesses employ to reduce the challenges associated with low transaction volumes. It often requires narrowing the scope drastically of the offering until sufficient scale allows you to expand to achieve a broader marketplace.

This type of hacking is completely necessary in my opinion. The thing with marketplace businesses is that they work great at scale. Once you have hundreds of thousands of users on the supply side and the demand side then everything works great. The challenge is almost always, how do you get there?

The main themes of liquidity hacking are:

  • Provide value to one side.
  • Find aggregators.
  • Curate one side.
  • Narrow the focus.
  • Use hamsters.
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