The Chicken or the Egg? How to build a marketplace that sticks.
For entrepreneurs, this infamous question about "which comes first" is much more than a whimsical exercise about the meaning of life. It's a very practical question that must be answered from Day 1 of the startup journey.
In other words, anyone building a 2-sided anything is going to need to figure out how one side is going to find enough people, things or services on the other side to make their experience valuable. This is especially true at the early stages, when founders need to find ways to "jump start" the platform so that both sides are engaged and satisfied.
Here are a few tips for overcoming the Chicken-and-Egg challenge that I've discovered during my own journey.
1. Carry a Shotgun and a Rifle.
Clearly, when building a platform that derives its value to its users from its users, you will need to focus on attracting people to join. This is a lot of work, and may require you to think out of the box. When we first started the early prototyping of Farmster, we began with face-to-face invitations to users. Since much of our target market is completely offline, we didn't have the luxury of employing SEO or simply running digital campaigns. We had to roll up our sleeves and physically get out to our market - which for us is out to the farms. Only after we reached our first 100 users or so did we begin shifting to more scalable approaches such as phone calls, text messaging and social media for users with internet access. But when we began to scale our marketing to a wider, we found that it was not always better than using smaller, focused efforts.
I often think of my interview in 2018 on a local TV station in Dar es Salaam, Tanzania as a good example. We had organized an event promoting our partnership with a local farmer's group. The local news media heard of the event, and ended up running the interview that evening. After being "in the spotlight", I expected to see hundreds, or even thousands, of users joining our platform after that. To my surprise, there was very little impact. Despite the hype of the moment, the message fell on deaf ears. Perhaps it was the wrong crowd, or the message itself wasn't very organized, or there was just no clear "call to action". That week, we received more sign-ups from the group of farmers at the event than from the countless views of the TV interview.
My moment in the Tanzanian spotlight
Fast forward to our work in Kenya in 2020. Now, as part of a larger strategic partnership with Standard Media's FarmKenya, we're pursuing a much more targeted TV audience - the KTN Farmer's TV show. Commercials promoting our platform will run continuously, will be clearly communicated with professionally curated graphics and narratives -- much more thoughtful than my spontaneous interview was 2 years ago. The lesson is clear - targeting the right audience (farmers) with the right message (repetitive, professionally developed ads) is a much better choice than general "shotgun" attempts.
An example of a TV Ad for FarmKenya.
2. A friend of yours is a friend of mine.
It's no surprise that reaching people through other people is often more effective than a big flashy marketing campaign. People trust their friends more than any media campaign, and our generation's marketing gurus have coined the term "influencers" because they understand the power of social channels.
This is important to keep in mind when building a 2-sided platform. The folks at NFX (think "network effects") have been saying this for years (BTW they are a great resource for anyone building a 2-sided anything). They recently outlined how opportunities to build social platforms will only expand in response to COVID19, which is bizarre given our mandate of social distancing and lockdowns, but the point is well taken. Just think about what happened to Zoom.
We recently ran some marketing activities in Wakulima Market - Nairobi's largest informal produce market - to advertise our Mobile App to the buyers there. At first, we began going ourselves to the market - wearing T-shirts and handing out brochures. But we found ourselves having to explain a LOT, starting with "who are you?". It took about 15 minutes to get one person to download the app - at best and we struggled to get 20 people to download in several visits to the market.
We then began discussing with a group of young, local traders there. They suggested the following: pay US to go around the market and we will advertise for you. The result: 80 downloads in one day - and a lot fewer questions in the process.
3. Draw upon the right networks
Building a network takes a lot of effort, especially if you go it alone. But leveraging the networks of others can have tremendous multiplicative effects. We've discovered two networks to draw from in expanding your own network of users: networks of your partners, and networks of your users.
Partners can bring you many new users, especially if they are aligned to your value proposition in some way. We've partnered with Non-profits, large companies and startups across a wide range of activities. Some of these partnerships, if not many of them have been exercises in futility - ebbing out time and energy for preparing the nuts and bolts of an agreement that ends up collecting cobwebs in your drawer. But the ones that have worked have proven to be well worth the time (often months, not weeks) in penning them into existence. Finding the right partners is its own challenge (for a future blog post) but the benefits are clear. Aside from the learning experience of having someone in your field tell you what their customers want, partnerships bring energy, excitement and lots of potential new users.
Another important network is that of your users themselves. Think about it. Every one of your users has come to your platform to find their counterparts - whether it's buyers of their produce or drivers to take them to work. Each user in turn has a network of their own friends and colleagues who may also find your platform useful. There are networks within your network.
But how do you activate these networks? One word: Design.
Make it easy for your users to share your platform. This is the most basic technique to build a network. For example, embed a "Share App" button like we have done in our app.
But an even more effective way to leverage networks of your users is to embed value into the experience of sharing. For example, on our Mobile App, we've designed the following screen:
Buyers of produce can build and follow their own network of farmers. Some may be part of the Farmster network (as you can see in the icon on the left), and some may not. But we've made it not only easy for our users to follow and build their own network, but we've added value into the experience. In this case - the time saved by quickly accessing the real-time status of the farmers that they know.
The right mix
All of these techniques can play a role in overcoming the Chicken-and-Egg challenges of early stage platforms. You'll need to determine the right approach through trial and error, and may be surprised at what works, or what doesn't work. The most important thing is to move quickly before the chickens run off with the eggs.