Three Sided Network

market

For many years now, two sided networks have been permeating into the different niches of the business world. However, it may be time to raise the bar. Two sided networks are essentially businesses or technologies that bring together two distinct consumer groups that feed off each other. They have been discussed in detail in a previous blog. Three sided networks have the potential to make platforms and markets more three dimensional and interlocked than ever before. And, in an age of cloud computing, social networks, and rapid information sharing, as Facebook likes to proclaim “The more connected we are, the better it gets”.

We believe in this principle over at The Search Party, and have created one of the first pure three sided networks for recruitment. Our site links three distinct consumer groups: recruiters, employers, and job seekers, each able to perform specific tasks, and each feeding off each other to create not just a market, but an ecosystem. Recruiters, job seekers, and employers all attract each other and make the platform more efficient as they sign up.

In fact, some of the most successful businesses of today are three sided networks. Companies that have adopted 3 sided networks include Microsoft and Google, and have helped both tackle the titan Apple in their respective industries. Microsoft provides Windows as a service in the computer industry which caters to three distinct groups: hardware developers, application developers and users. Google provides Android to the same three consumers, except in the smartphone industry. This creates an environment that enables specialisation of the softwares towards specific tasks and an ability to adapt to use most softwares available. This is what allows them to face, and even overtake Apple in their share of their market. Apple traditionally only provides two sided platforms. They provide the hardware as well as the OS, making room for Application developers and users. Apple thrives due to the incredibly high hardware performance it provides, as well as its easy user interface and design. However, its restrictions mean that although Apple revolutionised the smartphone industry by creating the first widely adopted multi-touch screen smartphone, over 70% of the market in 2012 was taken by Android devices.

Indeed, even LinkedIn is a three sided network, contributing to its great success. The system at LinkedIn currently connects users, recruiters, and advertisers.

But three sided markets are also beginning to be seen in places other than the tech industry. Postmates is a highly successful one, for example. Postmates is essentially a logistics platform that links a network of couriers to deliver goods to you as quickly and cheaply as possible. It links buyers, vendors, and couriers, and has primarily focused on the food industry so far, even partnering with Starbucks. In fact, they are now the number 1 mobile commerce application in the US. A more obscure example is Sofa Concerts, a German startup that connects hosts, artists, and fans. Hosts ask a band to come to their party. Meanwhile, bands set up profiles and play at a host’s party to get publicity. Fans can see local bands playing, and ask hosts if they can come. The more the merrier. The main point of the startup is to find and engage with new musicians, as well as a socialising tool on the side. Through the platform, musicians can be contacted and paid to come to more intensive events, such as weddings, birthdays, or corporate events.

So, three sided networks are not as rare as one might think. They are, however, tricky to implement. To create a three sided network, one has to make sure the distinct groups benefit from each other and not create friction. Adding a shark to a reef ecosystem may technically make it more diverse and give it more ‘sides’, but long term it may not be a healthy addition to the ecosystem as a whole. It is important to balance, for example, how many advertisements are allowed in magazines. If they interfere with the reading, the publication will lose its primary reading audience, and the platform will collapse.

Here at The Search Party we are confident that the three sided network is the way of the future. Indeed, it may not be long until we are seeing four, or even five sided networks implemented successfully. We may not have ever successfully tamed a shark to not destroy a reef ecosystem, but who knows what could happen with time?

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Elliott Gruzin

Elliott Gruzin is a digital contributor at The Search Party, where he writes blog articles on the recruitment industry, technology and generally what he’s interested in. He writes and watches movies in his spare time along with reading about philosophy and economics.

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