292: How to launch a platform when you've got no users [RERUN]

How do you start a marketplace when you have no customers? Or a dating app with no users?

This is the classic chicken-and-egg problem every platform faces: you need both sides to attract either side.

In this episode, Sophia Matveeva breaks down six proven methods successful platforms used to solve this problem, including:

• How Amazon converted from a pipeline business to a platform
• Airbnb's controversial (but effective) Craigslist strategy
• Why dating apps create fake profiles in the early days
• How Facebook started with just 500 Harvard students
• The $100M offer Joe Rogan received to switch platforms

You'll learn exactly how to get your first users when you're starting from zero.

This episode is part of a series on platform businesses. Listen to the full series:

• Episode 90: What makes platform businesses so successful
• Episode 92: How to get people to be nice to each other on your platform
• Episode 93: Lessons from the Netflix C Suite
• Episode 94: Learning effects: why getting more users isn't the only key to success

Resources mentioned:

• Platform Revolution: How Networked Markets Are Transforming the Economy - And How to Make Them Work for You (Book)

• Apple
• Spotify
• YouTube
• Amazon Podcasts
• Stitcher
• Pandora

TIMESTAMPS

• 00:00 - Introduction: The chicken and egg problem in platforms
• 05:07 - Pipeline to Platform Conversion: Amazon's evolution from retailer to marketplace
• 07:31 - Leveraging existing user bases: Airbnb's Craigslist strategy
• 09:52 - Seeding content: Dating apps and Quora examples
• 12:16 - Bringing influencers: Joe Rogan and Rumble
• 14:40 - Producer evangelism: Kickstarter, Indiegogo, and Party Slate
• 16:59 - Micro market strategy: Facebook and Tinder's launch approach

TRANSCRIPT

[00:00:00] Sophia Matveeva: How do you start a marketplace when you have no customers? Or a dating app that has no users? Platforms are amazing businesses because they can grow by themselves. But getting them started, that's the massive challenge that we're covering today.

[00:00:22] Hello and welcome to the Tech for Non-Techies podcast. I'm your host, Sophia Matveeva. If you're a non-technical founder building a tech product or adding AI to your business, you're in the right place. Each week, you'll get practical strategies, step-by-step playbooks and real-world case studies to help you launch and scale a tech business without learning to code.

[00:00:55] A new student who is working on a platform business idea was talking to me about how he's going to acquire his first users. And this is a really good thing because what you need to be doing when you are working on your original product development in the really early idea testing stages, you need to be thinking about, so when I do launch this thing, how am I going to get my first users? Because leaving marketing and leaving user acquisition till the last minute basically usually leads to disaster.

[00:01:40] He asked me, how do I get people to use my platform? And this episode is the answer. I actually did a series on platforms four years ago, and this is one of four episodes from that series. So if you're building a platform or a marketplace, go back and listen to episodes 90 through to 94, and I've linked them in the show notes. Today, you're going to learn six proven methods to solve the chicken and egg problem in platforms.

[00:02:17] So you'll hear how Airbnb, Facebook and Amazon and others got their first users when they literally had nothing. So let's dive in.

[00:02:49] Understanding the chicken and egg problem

We're going to cover something that my clients and students ask me all the time, which is how do I get a platform started? So for example, if you've decided to make a dating app and I'm going to use a heteronormative example here because it's just easier to explain for me. So if you're going to launch a dating app, how do you launch it if it has no men and no women on it? You need both to get started. But if you don't have men, will women be interested? No. If you don't have any women, will men want to create profiles in your dating app? No.

[00:03:42] This is the same with Uber. If there are no drivers, why would passengers download the app? Or with marketplaces? If there are no sellers on Etsy, why would buyers go to the site? So let's answer this today. This is known as the chicken and egg problem in platforms. There's actually a really good chapter on this in a book called Platform Strategy, how networked markets are transforming the economy and how to make them work for you. I've linked to the book in the episode page.

[00:04:34] I've written these definitions and examples on the episode page, which you'll find at techfornon-techies.co/chicken. That's chicken for chicken and egg. So go to the episode page to get all of these definitions, remind yourself of the case studies. The link to the episode page with all of the definitions and examples is in the show notes.

[00:05:07] Pipeline to Platform Conversion: Amazon

Let's begin with the first method, what I call the pipeline to platform conversion. Remember how last week we talked about pipeline businesses, which is what most traditional businesses are. And we also talked about platform businesses. As you might remember from last week's episode, in a pipeline business, you make a thing and then you sell it to me. And so the value goes one way. Some platforms originally start as pipeline businesses and then they become platforms.

[00:05:34] So for example, Amazon began as a retailer. You remember, it just sold books. So first they were a traditional pipeline business, but they were just doing it online, but essentially it was a pipeline business. And they ended up getting lots of traffic to amazon.com, which basically is to say that they had lots of interested buyers, but they only had one seller themselves. So you see pipeline business. Then Jeff Bezos decided to allow other people to sell their stuff on Amazon. And then they launched Amazon marketplace. Now as a customer, I can go on Amazon and buy stuff from Amazon and from other sellers. So basically in this example, in this pipeline to platform conversion, just know that if you already have one side of the platform working and interested and sorted, you could attract the other.

[00:07:31] Leveraging existing user bases: Airbnb and Craigslist

The second method is using a company that already has the user base that you want. And ideally, this would be a partnership where you both win or at least where the partner agrees. But sometimes you got to be a bit more Machiavellian, as my next example shows. So in the early days of Airbnb, the founders obviously had the same chicken and egg problem because every platform goes through it. They were wondering, how do we get people on our site to rent a place to stay if we have nobody offering their places to stay?

[00:08:00] So instead of investing in paid ads or on social media, they started manually reaching out to people who were advertising their places on Craigslist. And literally they would write to them and say, hey, I've seen that you're advertising on Craigslist. Do you want to list your place on Airbnb as well? And this was manual and it was tedious, but it worked. And now here comes the Machiavellian bit. After they saw that this was working, they wanted to scale it. So they coded an automated tool that reached out to new Craigslist postings automatically.

[00:08:42] So if you had posted your place for rent on Craigslist, you would get this email from Airbnb. I'm going to read it to you: "Hi, reposting your listing from Airbnb to Craigslist increases your earnings by $500 a month on average. Click here to repost a couch in the mission in one click." This is just an example. Obviously people took this option and signed up because I mean, wouldn't you, if you're already listing your place on Craigslist and then you basically get told that you could make more money for doing the same thing? Wouldn't you do it? I sure would. So obviously people took this option, signed up and basically led to viral growth.

[00:09:52] Seeding content: Dating apps and Quora

Now let's move on to the third method. This is called seeding content. And seeding content basically means producing content that sparks people's interest and then gets them to interact. And my dear smart people, you're not going to like the example that I'm going to give you here, but it is a real example. Most dating apps usually create fake profiles to draw in initial users. If you download a new dating service, the hot person you're speaking to might actually be a product manager called Bob, who's flirting simultaneously with 20 different people under four different profiles.

[00:10:42] This doesn't happen in mature dating platforms because it doesn't need to because once it's a mature platform, people are already uploading their profiles and reaching out to each other. But in the early stages, this is very common. A less dramatic example is Quora. That's a question and answer site. The Quora founders wrote a bunch of questions and then basically answered their own questions just using different profiles.

[00:11:12] This then attracted people who had the same questions and were searching for the answers on Google because then they could go and read the answers on Quora. And this also showed them how to interact on the platform. Basically, it showed them what to expect when you post a question. So people started posting their own questions. And actually, this is a really great example of platform governance, which is something that we will cover in next week's lesson in this mini-series.

[00:12:16] Bringing influencers: Joe Rogan and Rumble

The fourth method to solve the chicken and egg problem in platforms is basically bringing influencers to your platform by giving them some sort of incentive. Here, you're usually looking for people who already have a big following somewhere else, and you are basically paying them to bring their followers to your platform.

[00:12:42] So for example, earlier this year, Joe Rogan was offered $100 million to bring his podcast, The Joe Rogan Experience, which is currently on Spotify, to a new platform called Rumble. Joe Rogan didn't actually take this deal and his podcast is still on Spotify. But I wanted you to see this strategy in action. And what's interesting is that clearly the CEO of Rumble thought that Joe's following and all of the PR that Rumble would get if Joe actually joined was worth $100 million to Rumble.

[00:13:26] And here I want you to see something interesting. All of these strategies are marketing strategies. And as far as I'm concerned, they should be seen as part of the marketing budget. Because if you think about it, what is marketing? Marketing is basically investing in your company's growth. But we tend to have this outdated view of marketing, which is basically that marketing is all about TV ads and advertising and freeways. But from this episode alone, you've seen that, you know, Bob, the product manager who's pretending to be Heidi, Anna, Tracy, and Janet on a dating app, still needs to get paid to do it, right? So that's marketing. And this shows you that in tech product development, the lines between product and marketing are really blurred. This is normal, but it just requires a mindset shift for the non-techies who are used to a much more siloed approach.

[00:14:40] Producer evangelism: Kickstarter, Indiegogo, and Party Slate

Now let's move on to the fifth method, and that is called producer evangelism. And that's what platforms like Kickstarter and Indiegogo do. Under this strategy, your focus is on creating a service for producers so they come to your platform and bring their customers. So for example, Indiegogo began as a way for people with creative ideas to get funded. So the producers in this case are people with ideas for films and documentaries. And obviously their talents are in making movies, not in making websites that help them raise funding.

[00:15:26] So by providing a way for these creators, for these filmmakers, to easily upload information about their projects and collect money, Indiegogo was attracting the producers, which is the filmmakers, who would then share their Indiegogo page with their own friends and family and their followings. And so think about this. So for users, imagine your friend shares their Indiegogo page and you might go on it and then you would fund your friend because you're a nice person. So you fund your friend and then you see what other interesting projects there are on the platform. And you might fund a couple of other projects. Maybe you'll give most of the money to your friend, but maybe you'll kind of leave five bucks and 10 bucks here and there on other documentaries. And thus the platform starts growing.

[00:16:12] A company called Party Slate actually does this for events professionals. They link venues and vendors and party planners to people who are planning events. So basically if you've got a wedding or a bat mitzvah or if you're planning an event for your company, you would go to Party Slate. And you can actually hear my interview with the CEO of Party Slate, Julie Novak, where she talks in detail how she used this very strategy to grow her platform. So it has worked for Kickstarter, Indiegogo, and also you can get the details in the episode on Party Slate.

[00:16:59] Micro market strategy: Facebook and Tinder

Now, last but not least is the sixth method, which is called the micro market strategy. By the way, you really don't need to remember the names. Like who cares if you remember the names, you just need to know about the different methods. So remember the examples and forget about the actual names. It doesn't matter so much. So with a micro market strategy, what you need to remember is that with this strategy, you start by targeting a teeny tiny market where people are already interacting. And then you basically replicate that market.

[00:17:42] This is exactly what Facebook did when they launched in the tiny market that was basically Harvard College. So in this example, Harvard students were already interacting with each other offline. And then essentially Mark Zuckerberg and his co-founders just took that online. In this example, in the micro market strategy, even if Facebook just got 500 people to sign up and interact with each other, this would have been a huge success because it's people from different dorm rooms and people from different years checking out what everybody else is doing and looking at each other's photos. And these people already know each other or at least they know of each other.

[00:18:26] So basically they were curious what everybody was up to, which is why engagement was so high. But imagine if Facebook just launched worldwide and they got the same number of users to sign up. So they got 500 users to sign up by literally just doing a traditional marketing campaign and just advertising, you know, come and use Facebook and advertising on freeways. There would have been no interaction really whatsoever because yeah, they might have initial interest because people would be like, what's this? Let's have a look. But once they see that actually all of these people on it, all of these other 499 people are completely different, they're not connected to them and they're not living lives that they're particularly interested in, you're just not going to carry on interacting on it. So the platform would have died.

[00:19:23] The micro market strategy worked for Facebook and that was a long time ago, but it still works today and companies are using it today still. Actually, Tinder used this in its early days as well. And this is also how local neighborhood networks start and then spread across cities and then spread across countries. So in this week's lesson, you have seen how to use growth hacking and product thinking to solve the chicken and egg problem on platforms. And also you see that while this is a legitimately hard problem to solve, it can be solved and lots of companies have solved it. So if you're working on a platform, keep on trying these methods and keep on iterating and just know that, yes, this is a difficult problem, but it is a perfectly solvable problem.