Ignition Strategies for Platforms
A quick summary
The last time I tried building a platform, I didn’t know about ignition strategies. I struggled a lot. Though many ideas came up intuitively but I missed a mind map that could have helped me in thinking. So, after closing my start-up, I decided to read in detail about the platform. I went through multiple articles and the ‘Matchmakers’ book. In the next few posts, I am trying to share my understanding of different aspects of platforms.
Save these posts, as they will come in handy if you decide to build anything in the future.
Garvit Sahdev enjoys understanding the ideas that shape our world. The Thoughtful Tangle is an initiative to share this journey and experience with friends who love to do the same. He selects one idea and dives deep into it to understand its basics, relevance, impact, and opportunities around it.
Before we talk about ignition strategies, let us first understand briefly what a platform is and how they are different from other businesses.
In simple terms, a platform facilitates value exchange between multiple user groups —typically producers and consumers. A platform does NOT produce any value.
Launching a platform business is, therefore, different from other linear businesses as you need different user groups to exchange value with each other. Now, the interesting part here is that you just don’t need the different user groups, but you also need them in a significant number. This number is often called critical mass.
Why do platforms need critical mass?
Let us understand why we need a critical mass of every user group before a platform can enable a value exchange.
A user group comes at a platform when they are in a search of a value in the form of a product or a service, e.g. we all go to Google for searching for a web page which can give us the information we desire.
Now, this whole search process also has some value in terms of convenience, choice, trust in the selected product or service, etc. A platform provides this value and is generally proportional to the number of participants.
Let's see why.
More Choice – Many platforms deliver multiple options to one user group. If there aren’t enough options, the experience is suboptimal (e.g., a job board with few job postings won’t attract job seekers, and vice versa).
More Trust & Credibility – Early adopters may hesitate to use or invest time in an unproven platform with few users, fearing it won’t last or provide meaningful engagement.
Better Engagement & Activity – Without enough users, interactions are infrequent, leading to poor user experience and a lack of incentive to stay active (e.g., social media platforms, etc.).
Enhanced Personalization – With few users, platforms lack the data to offer strong recommendations, matching algorithms, or personalization, making the experience less compelling.
So, now we know why critical mass is required for any platform’s success.
Challenges in Achieving Critical Mass
The Coordination Problem: For a platform to work, all sides must join simultaneously, but neither will without the other. A restaurant booking service needs restaurants to attract diners, but restaurants won’t join unless diners are already there.
Time sensitivity: For a platform to keep growing, early adopters must stay engaged while the platform grows. If growth stalls, users perceive the platform as "dead," making recovery difficult.
Perception matters: A nightclub with too few people becomes undesirable; similarly, a platform with sparse users loses credibility.
Defining the Critical Mass Threshold for Platforms
The exact threshold varies by industry, but key indicators include:
Transaction Frequency – How often users engage (e.g., daily, weekly).
Liquidity - Transactions per user.
Matching Efficiency – The percentage of successful transactions.
User Density – Geographic or category concentration.
What is Ignition? How can we achieve it?
When a platform reaches a critical mass, we refer to it as ignition. Let’s see how we can achieve it.
The Zigzag Strategy refers to the dynamic approach platforms use to engage both sides of their user base—supply and demand—by shifting focus between them as needed to achieve balance and growth. Rather than building one side entirely before the other, successful platforms adopt a flexible strategy, adjusting their priorities based on market response and platform maturity. For instance, YouTube initially focused on attracting content creators but soon shifted attention toward improving the viewer experience around 2005, enhancing engagement and retention. Similarly, Alibaba grew by onboarding Chinese suppliers while concurrently attracting international buyers, carefully managing both sides to build a thriving marketplace. This zigzag approach allows platforms to stay adaptive and scale effectively.
The "Subsidize the More Elastic Side" strategy involves offering incentives or financial support to the side of the platform that is more sensitive to price or participation barriers—typically the side that has more alternatives or is harder to attract. By doing so, platforms can ensure availability and a smooth user experience for the less elastic, higher-value side. A prime example is Uber, which initially subsidized drivers through bonuses and guaranteed earnings to ensure there were enough cars on the road. This availability made the platform more attractive to riders, helping Uber grow in demand rapidly. By strategically supporting the more elastic side, platforms can balance their ecosystem and accelerate growth.
The Commitment Strategy is employed when one side of a platform requires significant investment and needs confidence that the other side will show up. To overcome this hesitation, the platform makes a bold commitment to attract and reassure the investing side. A notable example is Microsoft’s strategy with the Xbox: to persuade game developers to build for the platform, Microsoft sold Xbox consoles at a loss to rapidly grow a large user base. This demonstrated a strong commitment to the platform's success, giving developers the assurance that their investment would pay off with access to a broad audience. By taking on the initial risk, the platform builds credibility and reduces uncertainty for key participants.
The Self-Supply Strategy involves the platform itself providing the initial supply to jumpstart user engagement and demonstrate value. This approach is especially useful in the early stages when external contributors may be hesitant to join due to a lack of existing content or users. For instance, YouTube’s co-founder uploaded the first few videos to populate the platform and showcase its potential. Similarly, Apple preloaded its apps on the iPhone to ensure users had a functional and engaging experience from day one, even before third-party developers were allowed to contribute through the App Store. By self-supplying early content or services, platforms can overcome the chicken-and-egg problem and create momentum for network growth.
The Marquee Customers Strategy focuses on attracting high-profile or influential users to build credibility and generate momentum for the platform. These marquee participants serve as a strong signal of value, drawing in other users who want to be associated with or benefit from the presence of these well-known names. For example, shopping malls often secure anchor tenants like major department stores to attract both smaller retailers and a steady flow of shoppers. Similarly, OpenTable initially onboarded top-tier restaurants, knowing that diners would be more likely to use the platform if prestigious dining options were available. By leveraging the visibility and reputation of marquee customers, platforms can accelerate adoption and build trust within their target market.
The Shaping Expectations Strategy—often summed up as “Make ’Em Believe”—is about convincing each side of a platform that the other will show up, reducing hesitation and encouraging early participation. This is especially crucial in the early stages when network effects are weak or nonexistent. Platforms can use strong reputations, bold visions, or strategic communication to build credibility. For example, PayPal’s founder leveraged his personal reputation and ambitious vision to gain the trust of financial partners, assuring them that users would follow. Another approach is conditional contracts, where participation is guaranteed only if the other side commits too—creating a sense of mutual assurance. By shaping expectations effectively, platforms can overcome the initial trust gap and gain early traction.
The “Focus on a Niche” strategy, also known as building a “Thick Market,” involves concentrating efforts on a specific segment or geographic area to ensure a high density of interactions and engagement. Instead of spreading resources thin by targeting a broad audience, platforms zero in on a niche where supply and demand are more likely to meet, creating stronger network effects early on. For instance, PayPal initially focused on serving eBay users, where online transactions were frequent and the need for secure payments was urgent. Similarly, OpenTable launched in select cities with a concentration of top restaurants to ensure diners would find value and availability on the platform. By starting in a focused niche, platforms can build momentum, prove their model, and later expand more effectively.
The "Leverage Existing Networks" strategy involves tapping into pre-existing communities or platforms to quickly build initial traction and user bases. Instead of starting entirely from scratch, platforms can piggyback on established networks to reach potential users who are already engaged in similar behaviors. A well-known example is Airbnb, which seeded its early property listings by pulling data from Craigslist and encouraging hosts to cross-post on both platforms. This allowed Airbnb to quickly populate its marketplace and attract travelers with a wide range of options. By leveraging existing networks, platforms can overcome early-stage growth hurdles and accelerate user acquisition efficiently.
Key Words t o Remember
Where to Start - The “Focus on a Niche” Strategy
Early Growth - The Zigzag Strategy
Building One Side First - The "Leverage Existing Networks" Strategy, The Shaping Expectations Strategy, The Marquee Customers Strategy, The Self-Supply Strategy, The Commitment Strategy, The "Subsidize the More Elastic Side" Strategy
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