Been reading a bit about two sided markets lately and they are fascinating:

1/ Companies operating in the space build a platform to attract both supply and demand. There is a subsidy side and a money side. “Subsidy side” is a group of users who, when attracted in masses, are really attractive to the “Money side” – the other group which is willing to pay for access. Think game consoles where you have game developers (money side), gamers (subsidy side), and the platform providers (Microsoft and Sony).

2/ Pricing is generally pretty complicated where you have to consider elasticity for both sides but it gets even more complicated when the pricing is dynamic. Generally one side is more price sensitive than the other. That’s the side that you subsidize but as I learned this isn’t always the case.

3/ You have cost per acquisition on both sides and in some cases, you have to maintain a balance between the two lest the other churns out.

4/ Homing is a problem when it is easy for the sides to easily transact on other platforms. For example, both Uber riders and drivers can install the other apps side by side.

More: https://hbr.org/2006/10/strategies-for-two-sided-markets/ and http://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.23.3.125