A multi-sided platform serves two or more distinct groups of customers whose demand depends on each other. Buyers come because sellers are there, and sellers come because buyers are. The platform must set prices and rules for every side at once.
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Key factors
- Price structure. How fees are split between the sides matters as much as the total. The side that is most price-sensitive, and most valued by the other side, usually pays least.
- Getting started. Each side waits for the other, so a new platform must attract both at once, often by starting small in one place.
- Continual rebalancing. Prices need adjusting long after launch, because each side grows at its own pace.
- Adding a side. A new group, such as advertisers, brings revenue but can set its interests against existing users, who may see more adverts.
Examples
Vinted. Vinted charges sellers nothing to list or sell second-hand clothes and takes its fee from buyers through a buyer protection charge. Free selling brings more listings, and more choice draws more buyers. Sellers are the side that is harder to attract, so they pay least. Vinted reported its first full-year profit for 2023, with net profit of €17.8 million on revenue of €596 million.
Visa. Visa links cardholders, the banks that issue cards and the merchants that accept them. Merchants pay most of the fees, while many cardholders pay nothing directly. In September 2024 the US Justice Department sued Visa, alleging it used this position to keep rival debit networks out. The suit said more than 60% of US debit transactions ran on Visa’s network.
Frequently asked questions
What is the difference between a multi-sided platform and a two-sided market?
A two-sided market has exactly two customer groups, such as buyers and sellers. Multi-sided covers two or more, such as diners, restaurants and couriers.
Is a multi-sided platform the same as network effects?
No. Network effects are the gains each side gets from the other’s presence. A multi-sided platform is the business that serves those sides and sets the prices and rules between them.
Is a reseller a multi-sided platform?
No. A reseller buys stock and sets prices, so it sells to one group. A multi-sided platform lets sellers set their own terms and charges both groups for access.
Where does the idea of multi-sided platforms come from?
From economics. Jean-Charles Rochet and Jean Tirole set out the theory of two-sided markets in the early 2000s, explaining why platforms such as card networks charge each side differently.
Full guide: Multi-sided market business model
Related concepts
Network Effects
Transaction Platform
Multihoming
Platform Pricing
Cross-side Network Effects