4. Chicken-and-egg problem.
The supply side won’t engage until there is sufficient
volume on the demand side, and vice versa. Also
known as “cross-side network effects”.
!
Whether it’s is a chicken-and-egg or a chicken-or-egg problem depends on whether
participation adjusts more rapidly downward toward equilibrium or upward.
Carnaby Labs
5. How can you overcome this challenge?
Carnaby Labs
6. 1. Focus on one niche target group.
Carnaby Labs
10. High barriers to entry.
If you can successfully attain cross-side network
effects, you will hopefully have a privileged position in
your market; having created high barriers to entry.
!
A cautionary note: attention should be paid to switching costs and whether or not the
demand side can easily participate in multiple MSPs within the same market.
Carnaby Labs
11. Even without fixed costs or economies
of scale, MSPs typically need to attain
critical mass when they are launched
in order to even survive.
Carnaby Labs
12. A viable multi-sided
platform. At the prices
chosen, there are many
individuals, on both sides,
that want to participate. G
is the globally stable
equilibrium.
Carnaby Labs
Schmalensee (2010)
13. A non-viable multi-sided platform. At
the prices chosen, no matter how the
MSP is launched, there will be too
few individuals on either side of the
market with low values of Ω.
!
This scenario is common. Simply
because lots of ideas for MSPs are
not attractive to one or both sides of
the market to be viable at prices that
cover cost, no matter how they are
launched.
Carnaby Labs
Schmalensee (2010)
14. Thanks, let me know if
you found this useful!
@ScottTaylor
Carnaby Labs
