Chapter 2: Market Demand—The Ceiling of Growth
Let’s continue with the example from the previous chapter.
Amazon first becomes the number one in a category, and then continues to expand into other categories. In this way, it continues to grow.
The previous chapter also made it very clear. Expanding categories means opening up different markets. The reason for expanding different markets is that when the first category, books, became the first in the category, Amazon's growth had reached a ceiling. There was no other way. The demand for books was so great. In the face of many competitors, it had grabbed the largest market share. From then on, growth would only become more and more difficult. Even if it took over the entire market, it would not have much profit.
Of course, it is impossible for it to take over the entire market.
This is the ceiling. Every market and every demand has a ceiling. In the face of market demand, you cannot exceed this ceiling at most.
No matter what product you make, you must first understand the ceiling of the market where the product is located. Where is the growth limit of this product? You can even consider what to do after reaching the limit.
The same is true for Google. From search to Gmail, from Docs to expansion in various directions including cloud computing, in fact, they are constantly occupying a market, growing to the ceiling, and then occupying another market. Therefore, they can continuously achieve growth in various dimensions and indicators, and ultimately make users inseparable from Google, and spend a lot of time on Google every day, and even pay for it.
Speaking of this, there is one thing I have to say.
These are unilateral market products and multilateral market products.
1. Unilateral market products and multilateral market products.
Products can be broadly divided into two very different categories.
The first category is unilateral market products, or business products. Unilateral market products are products that directly target a certain type of user and meet one or several related specific needs of this user group.
Such products are the most numerous and common, and can be said to be everywhere in our lives.
For example, a pen, a MACBOOK, a mobile phone, a tool APP, a stand-alone casual game, etc.
Another type of product is two-sided and multi-sided market products. In other words, platform products. All social platforms are two-sided or multi-sided market products. E-commerce platforms, such as Amazon, are also multi-sided market products. Ctrip, YouTube, etc. are also two-sided or multi-sided market products.
A two-sided market product means that the product has two types of users, such as user B and user C of an e-commerce platform. A multi-sided market product means that the product is aimed at multiple types of users at the same time, and these users interact and trade through the product to obtain what the users need.
In essence, unilateral market products are about supply, while bilateral or multilateral market products are about supply and demand, or in other words, building production relationships.
Let me give you an example, a very common example.
For example, if you run an online store (independent website and app) to sell books, then your online store is a one-sided market product that supplies one commodity to your users: books.
Later, as your traffic and users increase, you allow other merchants to open stores on your website and APP and sell their products. At this time, your products have been transformed into two-sided market products. Putting aside your own stores, your products have been transformed into e-commerce platforms and become products with supply and demand relationships. You do not need to purchase goods, but to expand B users and C users, match their supply and demand, and achieve growth in order volume.
Later, in order to further increase the order volume, you added affiliate marketing to your product, and had many affiliate marketing users selling your supplier's products. At this time, your e-commerce platform became a three-sided market product. In addition to matching the supply and demand of B users and C users, developing affiliate members and helping affiliate marketing members place more orders also became a core task of your e-commerce platform.
2. Growth is different
The growth of unilateral market products is different from the growth of multilateral market products.
The growth of unilateral market products needs to rely on the existing ecosystem, while the growth of multilateral market products is essentially about building the ecosystem.
Let’s take the iPhone and the APP Store as an example.
First, the iPhone is a one-sided market product. Its sales growth relies on very traditional offline sales channels and online e-commerce platforms.
However, when the iPhone had a large number of users, the APP Store bundled with the iPhone had a large number of C users, and these C users had a large demand for expanding the functions of the mobile phone.
Therefore, the APP Store began to have a huge appeal to developers. The network effect led to a significant increase in the number of developers on the APP Store. At the same time, due to the increase in the number of developers and the number of APPs, more people bought and used the iPhone, so the number of C users on the APP Store also increased.
In this way, the APP Store has become a huge ecosystem for developers and C users.
As the iPhone's market share grew, the APP Store became a multi-sided market product with a huge number of users. Many developers created tools, apps, games and other single-sided market products that were distributed to users' phones through the APP Store. In the early days, due to the huge demand and insufficient supply, many apps gained a large number of users. This was the early dividend of the mobile Internet.
A few years later, as the iPhone market share stabilized and the supply and demand situation in the APP Store changed, the original dividends disappeared, and it was no longer as easy to attract a large number of users by making an iOS app.
Ultimately, growth has a ceiling, and this ceiling is determined by market demand.