As I’ve spent more time building marketplaces and advising other marketplace founders, I’ve observed a phenomenon that isn’t common across all marketplaces. I’ve tried searching for any existing writing and thus far have been unable to find a definition for it so I decided to take a stab at defining it myself. I’m calling them crossover network effects: When supply becomes demand in a marketplace and demand becomes supply.
Most marketplaces are two-sided with supply on one side and demand on the other with little to no crossover. Sellers have access or control of supply that keeps buyers coming back. An example of this would be trucking and marketplaces like Convoy where shippers are matched with truckers. It’s unlikely that shippers will ever get into the trucking business. On the other hand, there are numerous marketplaces where buyers can become sellers and vice versa. The frequency with which this crossover occurs in marketplaces happens along a spectrum. When it does happen, however, the marketplace as a whole benefits because it accelerates growth and stickiness. Crossover network effects bring down the CAC (cost of acquisition). There is also less education and onboarding friction because they already understand the value proposition as a participant of one side or the other. These benefits become compelling evidence for others to join the marketplace. Marketing and word of mouth drive new supply and demand which increases the overall value of the marketplace to all involved.
The most familiar example of a marketplace that demonstrates crossover network effects that almost everyone (at least in the US) can relate to is Craigslist. Anyone who has searched Craigslist classified ads to sell some old furniture has likely bought something off of Craigslist as well. Another popular marketplace where crossover effects regularly occur is StubHub. If you’ve ever bought tickets through StubHub before, it’s highly probable that at some point you’ve also sold tickets you couldn’t use on StubHub (they might have even been the same tickets!). Evite and Paperless Post are invitation platforms where invitees frequently become hosts. These are all examples of consumer marketplaces, but crossover…
