Uber and Airbnb

Uber and Airbnb: Two-Sided Network Effects Case Study

These pioneers of the sharing economy leveraged two-sided network effects to reach global scale. On Uber's ride-hailing platform, more drivers lead to faster pickups and broader coverage, attracting more riders; more rider demand in turn means drivers earn more, attracting yet more drivers. This virtuous cycle enabled Uber to dominate many markets. Riders gravitate to the app with the shortest wait and cheapest fare, and those are usually achieved by the platform with the most liquidity (active drivers & riders) (What Are Network Effects? | HBS Online).

Similarly, Airbnb grew by connecting hosts and travelers in a marketplace. As Airbnb accumulated a large inventory of rooms and homes, it attracted millions of guests looking for unique or affordable stays; high guest demand then motivates more homeowners to list their space. Over time, Airbnb built a trusted community with reviews and a global footprint that's hard for late entrants to replicate. Both Uber and Airbnb also illustrate the strategy of city-by-city network building -- each metro area had to hit a critical mass locally. Once they did, they were hard to dislodge, even by well-funded competitors (Uber's main U.S. rival Lyft remains a distant second, and Airbnb's early couch-surfing competitors faded).