In the digital age, systems that connect users and enable them to create value for each other have become important for business. One of these systems is a multisided platform, which is a business model that expands markets by connecting multiple, distinct user groups.

In this article, we provide an explanation of multisided platforms, including their features, characteristics and types, along with successful Japanese examples.

What's in this article?

• What is a multisided platform?
  
• Features of multisided platforms
  
• Other types of platforms
  
• Strategies for multisided platforms
  
• Keys to success with multisided platforms
  
• Examples of multisided platforms in Japan
  
• How Stripe Connect can help
  

What is a multisided platform?

A multisided platform is a business model that simultaneously connects multiple markets and user groups. They enable transactions and interactions between those groups and are considered to be one type of platform business.

For example, it is common for users in different roles – such as buyers and sellers or passengers and drivers – to conduct transactions and interact on a single platform.

Features of multisided platforms

Multisided platforms have several unique features and strengths.

User interaction and network effect

On a multisided platform, as one user segment grows, the value for other user segments also increases. This creates a network effect that accelerates the overall growth of the platform.

For example, when the number of buyers on an e-commerce site increases, the number of sellers will also increase. Similarly, an increase of sellers attracts more buyers, creating a positive spiral.

Diversity of revenue models

Multiple revenue streams – such as transaction fees, advertising revenue, premium subscriptions and data use – can be created with a multisided platform. Platform growth can also generate revenue from peripheral services, such as payment processing, financial services and marketing support.

Trustworthy and neutral design

A neutral system is necessary to bring together participants with differing positions.

For instance, creating an environment where transactions can be conducted with confidence – such as implementing review systems, guidelines and payment guarantees – is important to ensure neutrality.

Other types of platforms

There are other platform types that are often compared to the multisided platform model.

One-sided platforms

This platform is designed for a single user group or demographic, such as internal social networking services and intranets. They tend to be closed systems used within specific organisations, but open-type platforms do exist, such as online communities and knowledge-sharing sites that anyone can join. One-sided platforms are designed for information sharing and internal efficiency and are characterised by the absence of other participating sides.

Two-sided platforms

A two-sided platform is a system that connects two distinct user groups and creates mutual value. For example, on job search sites, an increase in job seekers raises the value for companies, while an increase in registered companies raises the value for job seekers. The design of a two-sided platform focuses on promoting growth while still maintaining a balance between the two parties.

Strategies for multisided platforms

On multisided platforms that connect several different user groups, increasing the number of users also increases the value for other groups. This is known as the "network effect." An effective platform strategy will depend on which side is expanded first and the types of incentives used.

Keys to success with multisided platforms

There are specific steps for expanding multisided platforms while maintaining balance to maximise the network effect.

Successful platforms have the following characteristics and features:

• A clear decision on which side to prioritise when expanding and acquiring new users
  
• Analysis of user behaviour data to improve the user experience
  
• Adoption of diverse payment methods suitable for the local culture
  
• Review systems, clear disclosure of fees and other steps for an environment that inspires user confidence
  
• Subsidy models and incentive systems to stimulate faster market activation
  
• Advertising, financing, logistics, etc., to consolidate multiple value sources on the platform
  

Examples of multisided platforms in Japan

Rakuten Ichiba

Rakuten Ichiba is a leading multisided platform that connects businesses and customers. From the beginning, Rakuten Ichiba focused on attracting customers by providing a points reward program and running a variety of sales promotions.

By clearly defining the value proposition that "this is where buyers gather," vendors gravitated toward the space, leading to an expansion in the number of products available. Furthermore, Rakuten Ichiba established processes to enhance trustworthiness by introducing a purchaser review system and store rating system at an early stage. By clearly disclosing store fees and the fee system, the company created and maintained a sense of transparency that helped form an environment that customers and businesses find easy to use.

Additionally, Rakuten has expanded its business into peripheral areas, such as advertising, finance and logistics. It also offers its own payment services, such as Rakuten Card and Rakuten Pay. These steps have helped to enhance customer convenience.

Through these initiatives, Rakuten has built an environment that connects multiple user groups (e.g. businesses, customers and advertisers). This has established Rakuten as a platform that easily integrates purchasing, payment and advertising.

S.RIDE

S.RIDE is a taxi dispatch platform developed and operating in Japan. The company partners with several major taxi companies with a strategy to secure the supply side first (i.e. drivers and vehicles). The company acquires customers through reliability and immediacy with their promise of "calling a cab quickly just by opening the app."

S.RIDE has strengthened collaboration with partner companies while also establishing a system that makes it easier for drivers and operators to participate. By clearly displaying fares and payment methods within the app, they have created an environment where customers can feel confident in using the service.

S.RIDE supports multiple types of cashless payments, including credit card payments, PayPay and Apple Pay, providing a smooth transaction experience that doesn't rely on cash. The company has successfully created a reliable service by connecting customers and taxi companies on a multisided platform that integrates transportation, data and payment.

Mercari

Mercari was developed in Japan and has grown primarily through peer-to-peer transactions.
Initially, it was a system for connecting two user groups: sellers and buyers. However, by using transaction data, the business has expanded into advertising, finance and used goods.

The company's post-transaction review and rating system helps ensure reliability and builds trust. The company also uses reward systems – such as promotional campaigns and reward points – to promote user participation.

Furthermore, the introduction of Merpay smartphone payments and postpayment services has enabled the company to build an integrated environment that unifies transactions, payments and credit while enhancing payment flexibility.

How Stripe Connect can help

Stripe Connect orchestrates money movement across multiple parties for software platforms and marketplaces. It offers quick onboarding, embedded components, global payouts and more.

Connect can help you:

• Launch in weeks: Use Stripe-hosted or embedded functionality to go live faster, and avoid the up-front costs and development time usually required for payment facilitation.
  
• Manage payments at scale: Use tooling and services from Stripe so you don't have to dedicate extra resources to margin reporting, tax forms, risk, global payment methods or onboarding compliance.
  
• Grow globally: Help your users reach more customers worldwide with local payment methods and the ability to easily calculate sales tax, VAT and GST.
  
• Build new lines of revenue: Optimise payment revenue by collecting fees on each transaction. Monetise Stripe's capabilities by enabling in-person payments, instant payouts, sales tax collection, financing, expense cards and more on your platform.
  

Learn more about Stripe Connect or get started today.