Citation
Failure to launch: Critical mass in platform businesses
TL;DR
Platform businesses require critical mass on multiple sides simultaneously
This paper analyzed why many platform businesses fail to achieve critical mass, despite having viable products. Evans and Schmalensee showed that two-sided markets require reaching quorum on both sides simultaneously - a coordination challenge that defeats many startups.
The research provides concrete guidance for platform launch strategies, emphasizing the importance of quorum-sensing mechanisms for detecting when critical mass is approaching.
Key Findings from Evans & Schmalensee (2010)
- Platform businesses require critical mass on multiple sides simultaneously
- Many viable platforms fail because they never reach critical mass
- Chicken-and-egg problem is fundamental to two-sided markets
- Strategies for reaching critical mass differ by platform type