How Two-Sided Marketplaces Create Value for Buyers and Sellers

Two-sided marketplaces

The world economy is shifting fast as a result of technological development. Its success may be attributed to the widespread use of two-sided markets. A few examples would be Amazon and Uber.

How does a marketplace function on both sides?

“intermediary” refers to the platform or middleman that allows two organizations to connect. Because of their interactions with one another, they get advantages.

Business models facilitating direct communication between buyers and sellers, such as a two-sided marketplace, are more popular. Providing value for both the end user and the business providing the service is the platform’s primary focus that acts as an intermediary.

This method of doing business has been around for some time. The creation of the newspaper in the 1930s is a classic example of a two-sided marketplace. In this two-sided market, readers and advertisers pay to read the newspaper.

From $18.6 billion in 2017 to $40.2 billion in 2022, that is the projected growth in revenue for these platforms, as reported by the Coresight Research Report.

The advantages and disadvantages of the two-sided marketplace business model will be discussed, as well as real-world examples of organizations that have adopted it.

What is a Two-Sided Marketplace?

A two-sided market is where vendors and buyers may meet and conduct business. The transaction begins with an offer to purchase made by the buyer and continues with requests (asos) to sell made by the seller. It is called a two-sided marketplace when it involves an unbiased third party or neutral platform that benefits buyers and sellers.

This kind of company structure goes by a few names: two-way market, two-sided network, etc. These terms refer to a two-way market used by businesses of various types. Market makers may provide services to participants on both sides.

The value may be generated via the two-sided market by simplifying and speeding up business dealings. All parties’ expenses will be reduced as a result of this. The bidirectional market platform will expand once there is an expansion on either side.

Considering the greater potential audience, users are more willing to pay a premium for access to this site. Compared to a traditional one-sided market, the most significant benefit of a two-sided market is that it eliminates the phenomenon of declining returns for the client as the market expands.

Many organizations, especially those in the service or industrial sectors, use a one-sided market structure, but this is changing as more and more capital is channeled into two-sided markets. How an intermediary interacts with parties on both sides of a transaction defines a two-sided market.

To maintain a productive atmosphere, those in charge of the platform must strike a balance between the two camps. Every price change on one side will result in a mutual adjustment on the other. This phenomenon is sometimes called the “waterbed effect.

Examples of Companies That Use the Two-Sided Marketplace Model

The success of modern business models depends on the widespread availability of online marketplaces that cater to buyers and sellers on both sides. The vast majority of successful technology companies worldwide use this approach. Now, let’s talk about a handful of them.


One excellent illustration of a Two-sided marketplace is Amazon. C2C (consumer-to-consumer) is the business model that the brand operates on. This way, vendors may promote their wares, and consumers can choose the most suitable option. Amazon does not manufacture or sell goods but is a platform for vendors and customers to connect.


Marketers and consumers alike rely heavily on Google as their primary search engine. The use of the Google search engine is free of charge, but the corporation does gather user data for the benefit of marketers. As Google collects information, it makes it available to consumers and businesses, bringing the two together.


Airbnb is another kind of marketplace where buyers and sellers interact. There are two sides to this transaction: renters on the one hand and landlords on the other. They might both feel a connection to the brand. The company owns no vacation rentals but is a broker between property owners and guests.


The ridesharing service Uber is another well-known use of the marketplace business model. It operates like Airbnb in that there are two types of users: drivers and guests. Vehicle ownership is not something Uber is involved with.

Users that require a trip to their location may post their requests on the site, where drivers can see them. You won’t need a car anymore (or a rental), but those who do may turn theirs into an income source.

In addition to these three, several additional instances of a two-sided market exist. Companies like PayPal, Netflix, and Facebook come to mind.

Benefits of a Two-sided Marketplace for Different Parties

In a two-sided marketplace paradigm, the customer, the advertiser, and the marketplace all play a role. There are a variety of advantages to this company strategy that may be enjoyed by every one of them.

Benefits for Marketplace Buyers

The following advantages are available to shoppers who go to the world to acquire products and services.

  • A Wide Range of Options: More options are available to buyers than in a traditional market.
  • Easy and Quick: Having sellers and buyers in one spot makes it simpler for consumers to find what they want. All available products are easily accessible, saving customers time and effort.
  • Top-notch Quality Products: The platform gives rise to natural rivalries. This motivates providers to provide their finest products at the most reasonable rates.

Benefits for Marketplace Sellers

Customers are just some of the ones who gain from a two-way market. However, vendors and advertisements may reap the same rewards.

  • New Target Market: Media buyers now have access to previously inaccessible demographics. Demand for their goods rises as they expand into new areas, which boosts their bottom line.
  • Growth Opportunities: More products may be sold because of the expanded market. Increasing brand recognition is one-way manufacturers and retailers may grow their businesses.
  • Hassle-free: Consumers are more likely to buy from a company hosted on a reliable network. The credibility of the Amazon marketplace is a significant factor in its success. As the seller does not have to earn the customer’s confidence from square one, they may save time and money on brand awareness. When a new company joins the platform, it automatically becomes credible.

Benefits of the Marketplace Brand

The platform or middleman plays a pivotal role in the success of a two-sided market. It has to guarantee that the buyer and seller have no conflicts. Several advantages for business may be shown below:

  • Low or No Operational Costs: The marketplace does not create or own any of the things sold there. Having no fixed expenses or COGS means less money spent on running the business.
  • Networking: The network becomes more robust as more individuals use the site to trade goods and services. The platform may attract more users and expand.

Challenges of the Two-Sided Business Model

The advantages of a two-way business model shouldn’t blind you to the difficulties that may arise from embracing it. These issues have the potential to stifle the platform’s efficiency and development.

  • The Chicken-And-Egg Problem: The platform must prioritize attracting buyers or vendors to attract users. With a wide selection, attracting users to your site would be easier. Similarly, businesses will only invest in marketing their wares if they believe they have a market to serve.
  • Maintaining the Quality Standards: As a mediator, the platform must guarantee the superiority of the goods it sells to its users.
  • Enhancing the Buyer Experience and Building Trust: Customers and sellers must trust the platform before utilizing it. It would be best if you thought Uber was reliable, cheap, and easy to schedule. The foundation of every successful consumer acquisition is trust.


Customers, merchants, and company owners may reap several advantages from the Two-sided marketplace business model. Customers can easily find what they’re looking for without having to jump through a lot of hoops.

This way, merchants may expand their reach into markets with a sizable customer base. Amazon, Uber, Airbnb, etc., are just a few examples of how this business model has expanded entrepreneurs’ opportunities.

Startups may see explosive growth if their founders can pinpoint a problem a large enough client base faces, create a platform that addresses that need, and launch it.

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