How to Solve the Two-sided Platform Chicken-and-Egg Problem: A Great Harvest!

Multi-sided platforms (also known as two-sided networks), bring together two distinct groups who each benefit from the other’s presence on the platform (e.g. is a classic two-sided networ

k where employers post jobs on the site because of the breadth and depth of the jobseeker base and jobseekers come to the site because of the quantity and quality of jobs on the site). Much of the existing literature on multi-sided platforms has focused on possible solutions to the inherent chicken-and-egg/Catch-22 condition of the model. The thinking goes that prospective users on each side of the platform will be reluctant to join without the presence of users on the other side. To skirt this issue, most solutions focus on one of four approaches:

  1. Subsidize one side of the platform to motivate those users to join.
  2. Establish exclusive relationships with key users on one side of the platform to lure users on the other side.
  3. Start off as a vendor to one side of the network and after building a loyal base of customers, begin facilitating transactions between those customers and other suppliers.
  4. Start off as a merchant acquiring inventory from suppliers and then resell that inventory to customers on the other side of the network before transitioning to a non-risk taking intermediary.

From my perspective, these strategies seem to be optimal for startups with completely innovative business models or those that reject the precepts of the lean startup methodology ( To the extent that no content already exists on the web from either side of the platform, I believe the aforementioned would be the best place to start. However, given the vast availability of content on the internet, there may be an approach to starting a multi-sided platform that would be far more consistent with lean startup methodology, harvesting.

Harvesting is the collection and processing of information already stored elsewhere. RentJungle (apartment aggregator), Kayak (flight aggregator), theLadders (job aggregator), Yipit (daily deals aggregator) are all multi-sided platforms that harvest content already on the web to solve the inherent chicken-and-egg problem of the two-sided network without subsidization, exclusivity, or starting off as a vendor or merchant to one set of users. Since both sides of each of the platforms above already transacted over the internet in a fragmented way (two key requisites), the simplest approach for serving as an intermediary was to aggregate the data from all the “sellers” (content providers) and serve as a one-stop shop for all of the “buyers” (users). In this way, each of these companies was able to avoid the Catch-22 by eliminating the need for one side of the platform to join the site in the first place.

At this point it is worth taking a step back to think about how harvesting fits in with the context of the lean startup methodology. Eric Ries, whose recently published book The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses has garnered much acclaim, writes that one of the most important techniques for a lean startup is the “minimum viable product”. Ries states that “the minimum viable product is that version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort.” The four traditional approaches to solving the chicken-and-egg issue of multi-sided platforms all most commonly require substantial effort and/or resources and do not lend themselves to rapid experimentation and testing. In contrast, harvesting is an extremely fast and easy way to acquire content from one side of the platform (as outlined below) and the harvested data can be pruned for different users to test various iterations of the platform.

All that said, how easy is it to harvest? In the absence of an API or direct-feed into one side of the platform, the lean startup can develop a simple scraper to acquire data from one side of the platform which then can be used to attract users on the other side. That said, if an API does exist, it might not even be necessary to build a scraper as the data may be readily available from a content provider (Amazon, Google, CNET, Facebook, Twitter and even the World Bank all offer APIs). In either case/whenever possible, I believe entrepreneurs adhering to the lean startup methodology should first attempt to harvest one side of the multi-sided platform in order to eliminate the chicken-and-egg problem before moving on to one of the more traditional approaches for vetting the viability of a multi-sided business model.



  1. David – good observations regarding the inherent chicken/egg problem associated with multi-sided platforms. While I do think the minimal viable product tenants are good to follow when building out your first product, there are two things to keep an eye on when using a harvesting method to tackle the problem of two-sided supply in a multi-sided platform. The first is backlash from the content providers that are being harvested. In general, I think it's ok to ask for forgiveness rather than permission. However, not all companies are as benevolent as others and not all content is as marginal as others. It would be reckless to not at least consider the reaction of a pissed off harvestee. The second thing I would keep in the front of my mind is the perception of the consumer in regards to the repackaging of other people's content. If your business requires a premium brand perception, there is the possibility that consumers will write off the site for its recycling of content.

  2. Sanjeev Jain

    David, nice blog!
    Data aggregation or harvesting could work well as, users like to go to one place to see filtered content that matches their requirement. Imaging a daily deal customer has to go through 100 daily deal websites to get what is best content in Cambridge area ? They may like to see 10-20 deals offered by top sites like Groupon or Living Social in Cambridge area and they dont want to visit all the sites. Deal aggregators may solve this problem. The idea can be extended to other area's as well.

    Another reason it may work well is that there is simply enormous amount of information out there. Users want filtered, polished and packaged content that they can digest simply. There are many niche websites that are doing exactly that. For example, Political news sites that aggregates news that fits with their readers ideology and political views and online deals websites like that aggregates deals offered by retailers like Amazon, Dell, Wal-mart etc for their bargain hunter visitors. Similar websites exists in almost every niche.

    At the same time, users may go away from harvesting site, if they do not get the value out of it. For example, many believe and we have verified that Kayak may not be able to get best price flight in "most cases". The reason is simple may airlines do not work with sites like expedia, travelocity, orbitz and Kayak. Furthermore, many airlines websites have different airfares on sites like expedia from where Kayak sources the deals and on their own websites. What Kayak receives is total dependent on data providers like expedia and airlines send to them. Moreover, they affiliate relationship with expedia, travelocity and airlines – may influence the results that they show. This may not be in the best interest of the customers. That said, Kayak still remains a good starting point to search for flight tickets.

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