- It is far faster (and easier) to obtain goods and/or services from this type of marketplace, as the process of doing so is reduced to using an app or other form of remote communication, rather than having to make a trip in person to the broker.
- It is far easier to find such brokers in the first place and negates lengthy searches for said brokers who provide the particular good and/or service.
- There can be increased trust in such a system as opposed to the alternative. An example is knowing about the car sent to pick up a customer via Uber, when with a taxi system there would be no prior knowledge of the driver, car, or any relevant information.
- There are better tools available to sellers, with updates and improvements being made all the time in the ever-progressing current day and age. They increase ease, effectiveness, and efficiency.
- There is a larger customer base, as with such a platform, more customers than ever have access to the business. This also provides the network effect for exponential growth.
- Entrepreneurs enjoy network effects where the value of the good, service, or platform providing them grows exponentially as the platform gains more users. Due to the nature of the platform though, the effect is double-sided since it benefits all parties involved, as more demand brings in more supply. Customers are spoilt for choice, sellers enjoy good business, and entrepreneurs can capture more from each transaction.
- There is also a feature of the two-sided marketplace called cross-side virality, which means that any new customer is also potentially a new provider. If these customers do become providers, then they will bring in more customers who are also potential providers, and so on.
A problem termed the chicken-or-egg problem is the opposite of network effects. Customers tend toward platforms with a robust selection of high-quality supply, but suppliers are interested in joining marketplaces that have lots of demand. This is a challenge for marketplace entrepreneurs in the early stages.
Many two-sided marketplaces may move to multi-sided marketplaces instead, where, if they find success, they may add on additional business models and therefore be able to enter new markets.
An example of this is Alibaba’s retail marketplace success, which allowed them to launch financial services as well as healthcare services.