Multi-sided platforms have experienced significant growth over the past decade. The value created from matching two people online can be high margin and very well protected against competitors that lack a large user base. However, this same advantage of having many users can also lead to threats in your company’s brand reputation. For instance, in the freelance market, the poor performance of freelancers can negatively reflect the platform’s image for allowing such low contractors to join. Had this phenomenon not been possible, the now infamous online dating term ‘catfish’, would not exist.
This article follows three case studies of how one company was unable to keep their users from tarnishing the brand and another was able to use advanced filtration techniques in order to build positioning around it. The first company, UpWork, is an online platform where freelance contractors can bid and fulfill work agreements by companies or individuals. The second company, TopTal, claims to only provide a platform for the top 3% of freelancers within the programming sector. We analyze what each company does in order to protect its brand against poor quality and user misbehavior so that you can learn from failures and model yourself after success. The third company you are already familiar with, Craigslist, which is the digital version of classified newspaper ads.
The depth and complexity of the screening process depends upon several factors, the same is applicable to almost any multi-sided platform. UpWork has virtually no screening process in place for its freelancers, any freelancer, regardless of their background or qualifications can create a profile and begin work. This may result in an extremely high volume of freelancers joining the website, but of very mixed quality. If your multi-sided platform is targeting the mainstream market, this may be appropriate for you. However, this process will inevitably result in people ‘gaming’ the system by providing false credentials and result in underqualified candidates applying to jobs.
The other website, Toptal, claims to only accept 3% of job candidates. Applicants must pass a personality test, video interview, and have their credentials verified. This can be a viable option if you seek to establish tight restrictions over the control of your freelance team. The tradeoff is that the rates are set at a minimum range of $50 and go up to $100 per hour or more in some cases. This means that the market growth of the company is limited to people who can afford and need of the top 3% candidate pool. Each screening process can result in a successful platform and satisfied customers, but one is of a higher risk than the other and should have additional controls in place to screen freelancers while work is being performed.
Even with controls to protect against fraud and deceptive accounts, users will still enter your multi-sided platform and misbehave. Without ongoing analysis and dispute mediation, these users have the potential to hard your brand and impact your performance. The widely publicized tragedy on Craigslist may be perceived by some to be based on a lack of ongoing analysis and screening. As illegitimate of a claim that this may actually be, many may perceive it otherwise.
Many multi-sided platforms have an internal analysis process that they may not always disclose the details of, and for good reasons. If companies are forthright about the details of their analysis process, it will only provide fraudsters with a step-by-step guide to outmaneuver them. Therefore, it is challenging to demonstrate specific cases of how companies are performing such analysis, but it is performed at varying levels depending on the balance between volume and quality.
On the furthest end of the quality control spectrum, candidates on Craigslist are provided with no mediation support because the cost is completely free. Much like the classified advertisements in a newspaper, respondents are expected to form their own judgements and exercise their own levels of skepticism. Ignorant people will always be outfoxed by unreasonable claims with a whimsical degree of optimism, but the challenge is ensuring that your multi-sided platform is not negatively impacted when that does occur.
UpWork provides a balance between quality control and total chaos, but their scale almost makes providing a consistently positive experience impossible. Freelancers receive ratings that are then used to form decisions about whom to hire. However, these ratings are easily deceptive because the most problematic freelance workers close the contract or issue a refund before the work has been completed. Therefore, freelancers have already devised a stratagem to outwit the system and employers are left befuddled in the ruble.
When one startup hired a company for its real estate operation, they used UpWork to hire an offshore development team. Not only did the team change the amount of hours required three quarters of the way into the project, their code did not work. When confronted, the freelancer on UpWork deleted the client’s entire website, including all the files on the back-end server. When confronted about this, the representative on UpWork said, we are not responsible for the behavior of freelancers that use our platform, unforgivingly absolving themselves.
In somewhat extreme circumstance of quality control and intermediation, the website TopTal assigns an account manager to review the project while it is being fulfilled. Any issues that arise are addressed by an intelligible United States based team and a conclusion is successfully reached. This process is possible with any multi-sided platform, but necessarily results in much higher prices that perhaps only the top 3% of employers can afford.
What we conclude from these three case studies is that users have the capability of negatively tarnishing a brand image. Building a multi-sided platform is the easy part, but managing your brand to avoid the misbehavior of your member network can pose a serious challenge. Having absolutely no constraints may result in low overhead and a massively scalable member network. Building an elitist platform with many controls may only tap a niche market with higher overhead that demands a larger price point. Positioning your company and avoiding the dubious activities of your user-base demands a balance between price, scalability, and market positioning.