Liquidity hacking
Which came first, the chicken or the egg?
In case you are still debating this age old question in your head, we can exclusively reveal the answer. It was the egg.
“The theory of evolution states that species change over time via mutation and natural selection. Since DNA can be modified only before birth, a mutation must have taken place at conception or within an egg such that an animal similar to a chicken, but not a chicken, laid the first chicken egg. In this light, both the egg and the chicken evolved simultaneously from birds that were not chickens and did not lay chicken eggs but gradually became more and more like chickens over time.”
Source: Wikinfo.org
Two sides marketplaces are always great on paper, but the first challenge is to solve the chicken or egg riddle. So, how did companies like Quora, Udemy, and Skillshare crack this thorny question?
By doing what Josh Breinlinger refer to as Liquidity Hacking
“In short, liquidity hacking is the strategy 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.” – Josh Breinlinger
In an interview on TechCrunch, Michael Karnjanaprakorn of Skillshare said to NOT try to do everything. Try to focus on one side of the marketplace and get them to bring in the other side.
And that’s what Eren Bali, one of the co-founders of Udemy did – albeit sneakily.
“there were many creative commons-licensed courses on the internet as part of the OpenCourseWare movement. We legally obtained these videos …and posted them on Udemy. That gave us our first hundred or so courses…”
Source: Quora
This tactic of populating one side of your website’s marketplace to present an impression of a busy, established offering also worked for reddit, Thumbtack, and Airbnb.
So, what are some key takeaways if you’re building a marketplace?
- Fake it ‘till you make it. Build a supply side first by either web scraping to compile data, automate with some bots, or manually populate it.
- Drive organic traffic by blogging and user generated content. Let service providers create their own profiles, which means lots of unique content.
2010 was a big year for five established online players today who were then genuine “newbies”.