Alessandro is a young Italian management engineering student with a great passion for social networks. *We are between 2014 and 2015 and Alessandro is particularly attracted by the work of influencers, people who use their following on social networks such as Facebook or Instagram to promote products or services for a fee from companies. Nothing particularly innovative, it's a new way of being a testimonial for a brand. Alessandro, however, asks himself a very simple question: wouldn't it be more effective if I were the promoter of a product to those who follow me on social networks? Towards my friends? From this simple intuition Friendz was born. Friendz is a groundbreaking startup involved in digital marketing. Their goal is to stimulate web's users in promoting brands they love through their active participation in creative campaigns tailored purposely for each company. The users’ interest in participating to the campaigns is stimulated by the reward they can gain, consisting of virtual credits they can spend on e-commerce; what is necessary and cannot be set aside is the user's preference for the specific product or service which has been the subject of the campaign, as this is the philosophy of Friendz. The aim of the reward is only to encourage users to take and publish high quality pictures when these are associated to the brand. Moreover, the users' contents are verified and approved by the staff before being published and made visible to other people, so that the company has a further guarantee concerning the quality of the images. Well...this is what Friendz does...but let's go back to the beginning of the story. Alessandro, a young student, an idea....and nothing else. How can you launch such an idea in the market? We can start by convincing people who will take and post the photos to subscribe to the service....unfortunately, though, without having brands offering the campaigns it would not make sense for them to sign up. We could try to convince a brand to buy this new marketing service...but again, who would buy it without having users on the other side? We are faced with a paradox...we need both sides to get the platform going...but one without the other has no motivation to get on. So, where do we start form? This phenomenon is known as the chicken and egg paradox and characterizes all transactional two-sided platforms. We could recount the same paradox in the launch of a new credit card or the creation of Airbnb or Uber. How does one resolve this situation? Three strategies have been identified in the literature: Two-Steps, Zig-Zag, and Commitment Community. A two-steps approach aims to get one of the two sides onboard first, using it to convince the second one to join. A Zig-Zag strategy, on the contrary, aims at pushing participation on both sides at the same time, convincing few customers on both sides at first and using them to convince the others. The third is the commitment strategy, which is related to those cases in which one of the two sides needs to invest in the platform before joining it, as in the case of console games. These three strategies are very useful from a theoretical point of view, but practically, how do you solve the chicken and egg paradox? Different tactics can be used for each strategy. To review them let’s go back to the case of Friendz They selected a two-step strategy. They created a large Facebook community of people interested in taking photos and earning credits by taking commissioned photos...from unwitting brands. In other words, the platform created the campaigns as if there was, on the other side, a brand asking for it....but there really wasn't. This "one-sided" phase allowed the company to create a large community with which to convince brands to get on board as well. This tactic is also called: "Simulating one side". This, however, is not the only alternative. Another tactic could be, especially in the case of consumers-to-consumers platforms, is to hire - or collaborate with - professionals on the supply side to ensure service delivery at the beginning. This is what Ugo did for example, another Italian platform when it was called Driver2Home and allowed young people returning from a night at the disco to call someone who could safely drive their car for them. Today, Ugo is an established platform offering a broader set of services that overcame the chicken and egg paradox. This tactic is called "contract side." These two tactics fall under the first macro group of tactics, which is "Stepping through a one-sided platform". A second group is called "One player for the others" and can be divided into two different tactics. The first is "involving key players", the basic idea is to bring on board a single player who can however facilitate the onboarding of both sides. This is what HousignAnywhere did, a platform focused on medium term rentals, for example for students going on international mobility...the chicken and egg paradox was solved by convincing some universities to come on board....providing both students looking and students offering a room. The second tactic is "Bandwagon effect from the other side", a great case is that of Qurami, an app that allows queue management by pre-booking in crowded offices such as post offices or university offices. The app later became U-First and had a big rollout during the beginning phase of the COVID-19 pandemic in Italy. In this case, by convincing a single customer on the supply side, such as a university secretary's office...you easily bring on board many users on the other side who want to use the secretary's service. Typically, this tactic is useful for bringing the demand side on board through the supply side. The last category, conceptually simpler, groups three "Proper two-sided tactics". The first is direct marketing, often through digital channels, which is very useful when a single advertising message can bring both sides on board, as BlaBlaCar did by buying a lot of advertising space in major French newspapers on the day of a planned strike. The second is "door to door", the one used by cases like Open Table to bring the first restaurants on board...literally going door to door to offer the service. Typically this is a tactic that is more common on a business side. The third is "Leveraging on an existing network", and is for example the case of Le Cesarine, a home restaurant platform that overcame the chicken and egg paradox by being born from a community of ladies with a passion for cooking who were the first to get on the platform. These short cases show how overcoming the chicken and egg paradox is not easy, but how there are various techniques to try to overcome it, often using different techniques on the two sides, even depending on whether they are consumers or business actors. To sum it up we have 3 strategies to solve the chicken and egg paradox: Two steps Zig zag And commitment strategy Which can be operationalized through 3 groups of tactics: Stepping through a one-sided platform, which can mean using a “contract side” tactic or “Simulating one side” tactic. One player for the other(s), which means “involving key players” or using the “bandwagon from the other side” Proper two-sided tactics, which are “direct marketing”, “door 2 door” and “leveraging on existing networks”. Which is the best for the platform you would like to create?
