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Matchmakers: Finding marketplace compatibility for multisided platforms

We live in a world of matchmakers. Airbnb matches people needing a room to people with an extra to rent. Lyft matches people needing a ride to people with a vehicle and an empty seat. eHarmony matches people looking for love with other people looking for love. The bottom line is, quite simply, supply and demand…with a twist. Multisided platforms are about matching one set of customers with another set of customers. And truth be told, bringing two customer groups together does not always result in a match made in heaven.

In their book Matchmakers: The New Economics of Multisided Platforms, MIT Sloan Dean Emeritus Richard Schmalensee and coauthor David S. Evans, explain how successful matchmakers excel and how entrepreneurs in this realm can improve their chances of survival. Schmalensee and Evans were among the first economists to analyze this marketplace and have consulted for some of the most storied platform businesses in the world.

Rich with stories from phenomenal winners and ignominious losers, their much-talked-about book guides the reader through this complex area of enterprise.

Not an entrepreneurial slam dunk

Included in Forbes magazine’s “17 Beach Reads for Creative Leaders,” Matchmakers explains why multisided platforms are becoming so popular—and profitable—and show how dramatic advances in technology have turned these entrepreneurs into today’s power brokers. Don’t let the flashy successes fool you, though. The authors say that starting a matchmaker is one of the toughest challenges in the global marketplace, and almost everyone who tries to build one, fails. The successes are so prominent and so dramatic, they suggest, that budding entrepreneurs don’t realize the pitfalls that await.

In an interview published in Forbes, however, Schmalensee and Evans say that the success factors of multisided platform businesses are, fundamentally, no different from any other. “The darlings of the 21st century aren’t using a new business model, but are using powerful new technologies to make an old business model work much better and add value in new settings. This, in turn, lets us see that the fundamentals of these new businesses are similar to those of old, familiar ones — from how they price, to how they solve the chicken and egg problem of getting both groups of customers on board. New startups can then learn from old successful ones. For example, the way Uber ignited and rolled out its pioneering ridesharing platform is very similar to how Diners Club ignited and rolled out the first payment card network in the early 1950s. Both started local, built up critical mass in a few geographic markets, then expanded nationally and eventually globally.”

In Matchmakers, the authors make the case that whether you’re an entrepreneur, an investor, a consumer, or an executive, your future is bound to involve multisided platforms—and in greater and greater numbers. Their book is designed to prepare the world for that eventuality.

Read a Q&A with Richard Schmalensee and David S. Evans.

Find out more about Matchmakers: The New Economics of Multisided Platforms.

Learn more about Richard Schmalensee.

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