A [[multi-sided market]], as the name suggests, is a business model that involves more than one distinct customer segment. The traditional view of a business often focuses on a [[single-sided market]], where a single customer segment purchases a product or service. However, in a multi-sided market, a company facilitates interactions between two or more interdependent groups of customers. A classic example of this is Google Search. While it appears to be a free service for anyone searching the web, the primary revenue source for Google Search comes from advertisers. Therefore, Google has at least two key customer segments: the users who perform searches and the advertisers who pay to display their ads. For each customer segment in a multi-sided market, the business model must offer a unique value proposition. In the case of Google Search, the value proposition for users is a free and effective search engine, while for advertisers, it's the ability to reach a vast audience of potential customers through targeted advertising. Furthermore, the relationships and revenue models differ significantly between these segments. Users interact with Google Search in an automated manner, while advertisers might engage through automated platforms, telemarketing, or direct sales. The revenue model for users is essentially free access, whereas advertisers pay for ad placements, demonstrating how different segments require distinct approaches. The concept of two-sided markets, a common form of multi-sided markets, is prevalent across various industries. LinkedIn connects workers and recruiters, Visa facilitates transactions between banks and merchants, eBay brings together sellers and buyers, and newspapers rely on both readers and advertisers. In each of these examples, the platform's success depends on attracting and serving both sides of the market effectively. One side often cannot exist without the other; for instance, without a substantial user base on Google Search, advertisers would have no incentive to pay for ads, and without advertising revenue, Google might not be able to offer the search service for free. While Google Search represents a relatively simple two-sided market, multi-sided markets can become considerably more complex. The example of a life sciences company illustrates this, where potential customer segments could include industrial enzyme manufacturers, and revenue streams might involve royalties and commercial licensing. In even more intricate scenarios, such as the medical device industry, a business might need to serve users, payers, hospitals, insurance companies, and regulators, each requiring a tailored value proposition and a clear understanding of the revenue model associated with them. Understanding these multi-faceted relationships is crucial for entrepreneurs venturing into such markets. ## Activities - Watch the video [2 Sided Market](https://youtu.be/qN-TbtEWMJE) ([[Udacity - How to Build a Startup]], Lesson 6.11) - Watch the video [Multiple Customer Segments](https://youtu.be/E0CPjTwT5P8) ([[Udacity - How to Build a Startup]], Lesson 6.13) - Watch the video [E. Coli Example](https://youtu.be/ZHP5xHn5gUw) ([[Udacity - How to Build a Startup]], Lesson 6.14) Next: [[Market Types]] Back to: [[Who Will Be Your Target Market?]]