economics of two-sided markets

Two-sided markets involve platforms that connect two distinct groups of users, facilitating interactions between them. For example, online marketplaces like eBay connect buyers and sellers. The platform benefits from network effects; as more users join one side, more participants on the other side are attracted, enhancing value for everyone. Revenue can come from various sources, such as transaction fees from sales or advertising. Effective management of both sides is crucial, as the success of the platform hinges on balancing incentives and ensuring a thriving ecosystem that benefits all participants.