Marketplace Liquidity: How Side Switching Can Help & How to Apply SparkToro's Data and Get Better Marketing Results

Marketplace Liquidity: How Side Switching Can Help & How to Apply SparkToro's Data and Get Better Marketing Results

Marketplaces play a crucial role in connecting buyers and sellers, but in order to be successful, they need to achieve a critical mass of demand and supply. This critical mass, also known as liquidity, is easier to achieve for 1-sided networks like social networks, where the same users represent both demand and supply.

The liquidity of a network depends on the number of users and the density of connections between them. On marketplaces, these connections link demand with supply, and therefore, liquidity depends on the number of suppliers that can be matched with a customer's request. This supply density can be measured in two ways - the ratio of "match-able" supply to demand within a region or within a category.

The importance of supply density varies based on the primary characteristics of the marketplace. For example, Uber needs to maintain a specific supply to demand ratio within a few miles to achieve the targeted wait time. This makes liquidity a challenge for hyperlocal marketplaces, which need significant investments in field operations.

On the other hand, Airbnb is a marketplace with cross-border network effects. Guests judge Airbnb's product experience by their ability to find a high-quality property at their desired destination. While Airbnb still needs to maintain a specific supply to demand ratio within a destination, it can spread across a larger geographic area. Geographic density is not a significant constraint to liquidity for Airbnb.

Another factor that affects liquidity is the nature of supply. Uber has commoditized or interchangeable supply, where riders are primarily looking for on-demand transportation and are not sensitive to the brand or identity of the vehicle or driver. This makes it easier for Uber to acquire a critical mass of supply across a few categories.

In contrast, marketplaces like Airbnb have differentiated supply, which creates complexity in enabling matches but also makes them more defensible. However, it is challenging to acquire a critical mass of supply across numerous categories.

The characteristics that make marketplaces defensible and scalable also impact how easy or difficult it is to reach critical mass. Marketplaces with both commoditized supply and cross-border network effects face the lowest hurdles to liquidity. On the other hand, hyperlocal marketplaces with differentiated supply face the most significant challenges.

For hyperlocal marketplaces with differentiated supply, there are two options to achieve liquidity. One approach is to use a "come for the tool, stay for the network" strategy. Another approach is to rely on "side switching," where marketplace participants can switch between the demand and supply sides. This approach is similar to what happens on social networks, where users act as both consumers and creators of content.

To maximize the liquidity advantage from side switching, marketplaces need users to switch frequently between the demand and supply sides. This requires embedding side switching as a core part of their value proposition. Poshmark, a Tier-1 marketplace, is an excellent example of a marketplace built on side switching.

Moving on to SparkToro's data and its application in marketing. SparkToro provides data on social networks like Instagram, Twitter, LinkedIn, Facebook, Pinterest, and more. This data allows marketers to understand what their target audience talks about and engage with the sources of influence that reach them.

By following and engaging with these sources of influence, marketers can pick up on the language, styles, authors, subjects, positioning, and more that resonate with their target audience. This information is crucial for creating content that earns engagement, traffic, subscribers, and search rankings.

One of the challenges marketers face is the lack of actionable data. Many persona profiles lack the necessary data to drive action, resulting in a disconnect between the goals of the persona and the available data. To break through the noise and generate high ROI, marketers need every advantage they can get.

Facebook and Google have limited data and targeting options, leaving advertisers at the mercy of their in-house ad targeting tools. What advertisers need is data about their target audience's behavior in online platforms, and SparkToro provides this valuable data.

Early customers of SparkToro have reported seeing 2-5 times ROI by selecting better audiences in their ad builders on platforms like Facebook, Google, and Twitter. SparkToro fills the gap by providing audience-specific reach, allowing advertisers to target their desired audience more effectively.

One unexpected application of SparkToro's data is in keyword research. Clever marketers have started using the tool's results to outsmart their competition by uncovering topics and keyword targets that would otherwise remain invisible. By running websites and topic lists through SEO keyword research tools, marketers can uncover searched-for words and phrases that their competition is unlikely to find.

In conclusion, achieving liquidity in marketplaces and improving marketing results require strategic approaches. For marketplaces, side switching can be a valuable strategy, especially for hyperlocal marketplaces with differentiated supply. By encouraging users to switch between the demand and supply sides, marketplaces can achieve liquidity and expand into new categories.

For marketers, SparkToro's data provides valuable insights into audience behavior on social networks. By leveraging this data, marketers can create content that resonates with their target audience and outsmart their competition in keyword research. The actionable advice for marketplaces is to embed side switching as a core value proposition, while marketers should utilize SparkToro's data to improve targeting and content strategy.

To drive improvement in marketplace liquidity and marketing results, here are three actionable pieces of advice:

1. Prioritize user experience: Make it easy for users to switch between the demand and supply sides of your marketplace. Streamline the process and provide incentives for users to participate on both sides.

2. Invest in field operations: If you're operating a hyperlocal marketplace, recognize the importance of maintaining supply density within a specific geographic area. Consider making significant investments in field operations to achieve and maintain liquidity.

3. Use SparkToro's data: Take advantage of SparkToro's data to understand your target audience's behavior on social networks. Engage with sources of influence and use the insights to inform your content strategy and improve your marketing ROI.

By implementing these actionable advice, marketplaces can achieve liquidity and marketers can improve their targeting and content strategy, ultimately driving better results.