Two-Sided Markets and Social Media

Abstract

This chapter introduces the concept of “two-sided” markets and shows how they comprise a unique type of social media that facilitates the development of social networks oriented toward specific product domains (e.g., restaurants), specific brands (e.g., Starbucks), or common consumer concerns (e.g., Yelp.com). Not only do two-sided-markets constitute a unique type of Website, they can be integrated with or linked to other social media, thereby enriching the value of both the two-sided market and its partner(s). Because a two-sided market increases in value for all three parties that constitute it (consumers, the platform, and vendors) as the number of both vendors and consumer participants grows, platform managers are eager to use incentive strategies to encourage consumers to increase their active use of the site. Among these incentive strategies are various reward programs that stimulate use by rewarding consumers who add content, post reviews, comment on others’ reviews, and more. Part of this chapter describes two online experiments that demonstrate that two types of common reward programs, monetary and social rewards (Heyman & Ariely, 2004), are effective in stimulating consumer intent to use the site more actively than without a reward. Finally, we make several suggestions for integrating two-sided markets into other social media, and we propose several avenues for future research into this topic that should increase our understanding of how consumers behave in two-sided markets and how platform managers can both enhance active use and use the information derived from this use.