The Model Thinker: What You Need to Know to Make Data Work for You by Page Scott E

Author:Page, Scott E. [Page, Scott E.]
Language: eng
Format: mobi
Publisher: Basic Books
Published: 2018-11-26T16:00:00+00:00

Market Creation and Double Riots

The riot model can be extended to cover internet start-ups that create new markets of buyers and sellers. To create a new market, a start-up must create a population of buyers and a population of sellers. A site that matches dog owners and dog sitters needs to sign up dog sitters as well as dog owners. Similar incentives exist for sites that offer package delivery, transportation, or housecleaning. Each must create two populations to succeed, and the populations must grow at approximately the same rate. Otherwise, either the sellers or the buyers will be unable to find a match and they will leave disappointed. In other words, the start-up must create a simultaneous double riot.

The successful start-up Airbnb provides a mini case study of a double riot. Airbnb matches people willing to rent a house, room, or apartment with people looking for a place to stay for a short period of time. Airbnb needed to build two populations: renters and people letting out their apartments. People looking for a place to rent would visit the site only if the site had a sufficient number of places available for rent. Therefore, Airbnb needed to sign up people willing to list apartments. The first two launches of Airbnb failed. Listing an apartment on the site required effort—downloading pictures and including other information. No one had an incentive to list until Airbnb had a large population of renters.

Thus, Airbnb needed enough listings to create a riot among renters—that is, to get renters to come to the site. They also needed enough renters to create a riot among those who wanted to list rooms and apartments. Whether Airbnb would take off would depend on the thresholds for the two groups. The bigger problem was getting people to list, as that required more effort. Airbnb overcame this problem by going door-to-door and helping people list their apartments. Once that happened, the renting riot began and the listing riot followed.2 The business succeeded because the founders were able to bootstrap a sufficient number of initial renters so that a double riot ensued. They constructed the tail, and the tail wagged the dog.

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