How To Build a Successful Expert Two-Sided Marketplace Startup

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For two-sided marketplaces to succeed, the platform has to add value to both sides — the customer and the vendor. This is especially critical for Expert Two-Sided Marketplaces (E2SMs).

An E2SM is a platform that matches customers with quality vendors for services that require at least a little expertise — from mechanics to tutors to attorneys, and almost everything in between. The marketplace is designed to take the complexity and the overhead out of transacting these expert services. In theory.

In practice, a lot of E2SMs wither and fail for three reasons.

The first is that the service is too niche to generate enough demand for an expert marketplace to exist.

The second is that the supply is too thin to serve the market, which leads to a glut of “bogus” experts.

The third, and the most damning, is that the platform is of little value to either the customer or the vendor.

The Value Proposition of a Two-Sided Marketplace

Let’s look at how a traditional two-sided service marketplace like Uber adds value. Uber signs up both customers and vendors to its platform, and then fills customer demand with vendor supply.

The value proposition for the customer is that they receive a high percentage of the value of the service for low percentage of the cost. The value proposition for the vendor is the ability make money working independently.

The Uber platform is able to add value to both sides by removing overhead from the existing process, introducing efficiencies using technology, and delivering the service in a novel way, sometimes sidestepping industry standards to get there.

Most traditional 2SMs are built for low-experience services, so that any random vendor can serve any random customer. There isn’t much matching of the two sides — usually it’s just limited to customer location and maybe the size of the Uber vehicle.

But Experts 2SMs Don’t Work That Way

The biggest difference between a 2SM and an E2SM is that the E2SM must provide the customer with the same level of expert quality as the traditional market. In order to be able to do this and stay cost-competitive, the platform needs to offer a different value prop for the vendor: Fill the expert’s available time with billable time.

There are basically three ways to do this:

One: Flatten the vendor’s demand curve.

An independent expert, no matter how good they are at what they do, can rarely fill every hour in a week and every week in a year with billable work. Demand for expert services is always feast or famine. Clients turn over, billable work gets thin, demand gets lumpy.

If an E2SM can match time-dependent demand from the customers to fill “down-time” hours from the vendors, it adds value to both sides. The vendor gets paid for what used to be down time, and the customer pays less than full price for that time.

Two: Reduce the time and cost to find new customers

Again, even the best and brightest experts in any field have to spend a good chunk of their available time networking, finding new clients, marketing themselves, closing new deals — this not only wastes potentially billable time, but it costs money too.

If the E2SM markets itself and its vendors through the reach of the platform, it adds value to both sides. The vendor saves time and money landing new business, and part of that savings goes back to the customer.

Three: Eliminate the middle-man

Here’s a little secret. Most experts already work 40 hours a week for another company. That company is not only inflating the expert’s billable rate with overhead, but it’s also paying the expert only a fraction of that billable rate — sometimes less than 50%.

If the E2SM can replace the essentials that the company provides, it adds value to both sides. The vendor gets more money per hour than they would with the company, and the customer pays less per hour than they would if they transacted through that company.

Adding Value to Both Sides of an Expert Marketplace

To add real value to both the customer and the vendor, an E2SM platform needs to maximize these features.

Added and enhanced application

In a 2SM, everything involving the transaction should be conducted within the platform. This means that discovery of the vendor, matching, selecting the service, scheduling, and payment all needs to be handled within the application.

That’s the bare minimum. The E2SM platform should also handle as much of the execution of the service as possible. This includes onboarding, preparation, communication, ratings, and follow-up.

You’re not just creating efficiencies here, you’re giving both the customer and the vendor reasons to keep their relationship confined to the platform. Look at Uber as an example: No matter how awesome your last driver was, the platform’s value can’t be replaced. The next time you need a ride, you won’t call that driver directly, you’ll go right back to the platform.

Reduction in Friction

Customers will come to your marketplace having no idea what they need. Vendors will come to your marketplace trying to be everything to everyone. Don’t give them the ability to get lost in your platform.

The consumer must be walked through each step. You should only ask for information when you need it, but you should get all the information you need when you ask for it.

You’re going to have to walk the vendor through each step as well. They need to be able to do what they do without having to worry about marketing, closing the sale, keeping up with the billing, or scheduling the appointment.

My strategy here is to anticipate and automate. Understand each step of both the customer and vendor processes. Then, instead of asking a lot of questions, give them a limited set of options that build off the last set of options.

Constant Communication

An E2SM has to establish trust on both sides. Vendors need to know they’re not going to get an army of bad customers. Customers need to know they’re not going to get screwed by shady vendors. Trust can’t be assumed. It requires a lot of verification and constant communication during the process.

Every aspect of how the E2SM operates should be transparent. Customers will need to know exactly what they’re getting and when. Vendors will need to know exactly what’s expected of them and when. All of this needs to be communicated repeatedly, preferably through the platform itself.

Superior Vetting and Matching

E2SM derivatives — namely freelance marketplaces and expert service directories — vet poorly if at all. And rarely do they accurately match what the customer wants to what the vendor offers.

Most of the vetting for traditional 2SMs revolves around searching for negatives — a criminal check, maybe a credit report. If there are no red flags, the vendor is in.

For an E2SM, it’s the reverse. You have to prove a positive, and this is much harder to do. At a minimum, you have to ensure that the vendor is indeed an expert — that they have a track record that shows they’re not only qualified, but great at what they do.

A better process also establishes that the vendor can operate in an independent manner, without the crutches of a company to fall back on. And also that they’re good with customers.

The best process breaks down what the vendor tells you they offer and translates that into what the customer tells you they want. This creates data points so that the customer gets exactly what they need.

Guidelines and Best Practices

While vetting and matching are the top ingredients for making the platform work, consistency and quality are the top ingredients for making the marketplace work. This is best accomplished by requiring the vendors to adhere to a set of guidelines and best practices for every service.

This is not a burden for the vendor, this is a value-add, because it gives them a rulebook and a roadmap for operating on your platform, which may be a much different experience than operating in their own environment.

It also allows you to provide a pledge of quality and consistency to the customer — furthering that trust and keeping them a customer for a good long time.

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Written by

I’m a multi-exit, multi-failure entrepreneur. Building Precision Fermentation & Teaching Startup. Sold Automated Insights & ExitEvent. More at joeprocopio.com

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