A to Z of Marketplaces for Product Managers - Part 1

Seeding supply, hacking demand, and driving liquidity

If there’s one thing I’ve learned from building marketplaces, it’s this—getting the first set of users is brutal. You need supply to attract demand and demand to attract supply. It’s the ultimate chicken-and-egg problem, and many marketplaces never make it past this stage.

That’s why I’m starting this series—A to Z of Marketplaces—to break down what works (and what doesn’t) when building and scaling a marketplace. No fluff, just real strategies from companies that cracked the code.

Let’s kick things off with Uber and Airbnb—two startups that faced the cold start problem head-on and won. Here’s how they did it.

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🚖 Uber’s 3-Step Playbook for Breaking the Cold Start

When Uber first started, no one wanted to open an app just to see zero cars nearby. And no driver wanted to be online if no one was booking rides. Sound familiar? That’s the classic cold start problem. Here’s how Uber cracked it:

1️⃣ Seeding the Supply Side

Uber onboarded drivers before attracting riders. But getting drivers to wait around for uncertain demand wasn’t easy—so Uber guaranteed minimum earnings, even if they didn’t get enough rides. This kept them engaged until demand picked up.

2️⃣ Powering Demand

Instead of marketing to everyone, Uber focused on high-intent users—tech professionals, event-goers, and business travelers. They offered free rides to hook early adopters, knowing that once they experienced the convenience, they’d spread the word.

3️⃣ Optimizing for Liquidity

Uber’s real secret? Wait times. The faster a rider got a car, the more likely they were to stay. Shorter wait times → happier riders → more demand → more drivers → a self-sustaining loop.

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🏡 How Airbnb Solved Its Cold Start Problem

In the early days, Airbnb had a huge problem—no one wanted to list their home on an empty platform. Their breakthrough? A few genius moves:

✅ Hacking Craigslist – Instead of waiting for hosts to show up, Airbnb built a tool that let hosts cross-post their listings on Craigslist, instantly tapping into an existing audience.

✅ Professional Photography – They realized better photos meant more bookings. So Airbnb sent free professional photographers to hosts, making listings look more premium and boosting conversions.

✅ City-by-City Expansion – Rather than going broad, they focused on winning one city at a time, ensuring a perfect balance of supply and demand before moving to the next.

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🚀 Takeaway for Product Builders

Building a marketplace? Here’s what actually works:

✅ Start with supply first – No one wants to show up to an empty marketplace.
✅ Find creative hacks to bootstrap demand – Don’t wait for users to come; tap into existing networks.
✅ Optimize for liquidity – The faster users get value, the stronger your marketplace becomes.

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🏆 The Marketplace Flywheel: Why This Works

The best marketplaces don’t just "launch"—they build a liquidity flywheel, where more users bring more value, which attracts even more users.

Here’s why Uber & Airbnb’s playbooks worked so well:

🔹 Supply-Side First → Critical Mass
If demand shows up first but there’s no supply, users leave. Ensuring a solid supply base from Day 1 keeps the platform valuable.

🔹 Targeted Demand → High Engagement
By focusing on early adopters who truly needed the service, these companies created loyal users who spread the word.

🔹 Speed-to-Value → Retention
The faster users experience value (shorter wait times, high-quality listings), the stickier the marketplace becomes.

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📈 Scaling a Marketplace: The 3 Phases

1️⃣ Cold Start – Solve the chicken-and-egg problem with supply-first strategies and demand hacks.
2️⃣ Liquidity – Ensure every user gets value fast, leading to organic growth.
3️⃣ Defensibility – Build network effects, data moats, and unique advantages to stay ahead.

Uber and Airbnb didn’t just break the cold start problem—they engineered flywheels that made their marketplaces unstoppable.

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💡 What Other Marketplace Strategies Have Impressed You?

This is just the start of A to Z of Marketplaces. Over the next few weeks, I’ll break down more marketplace playbooks, monetization tricks, and scaling tactics.

What’s the best marketplace strategy you’ve seen? Drop a comment—I’d love to hear your thoughts! 🚀

🚨Resource alert

• API for Product Manager blog -

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