The most valuable systems aren’t those that simply automate existing processes; they’re the ones that restructure markets by connecting previously fragmented actors into a single network.
Two-sided markets are among the most powerful business models in the digital economy. Instead of selling a product to a single customer group, you build a platform that connects two distinct communities that benefit from interacting with each other. The platform becomes valuable precisely because it attracts both sides simultaneously. Each new participant increases the value for the others, creating powerful network effects. Two companies that illustrate this dynamic well – albeit in very different industries – are Fidesmo in contactless payments and Burt Intelligence in digital advertising analytics.
Payments have historically been a tightly controlled ecosystem. Banks issue cards, payment schemes such as Visa and Mastercard run the networks and device manufacturers provide the hardware used by consumers. Introducing new payment experiences into the ecosystem is difficult because every participant must integrate with the others.
Fidesmo addresses this challenge by acting as the connector between the players. Its platform enables contactless services, such as payments, transport tickets and digital keys, to be embedded in devices containing secure NFC chips, including wearables like rings, watches and bracelets. Through its payment service, consumers can connect their bank card to a wearable and simply tap the device against any contactless payment terminal to pay. The underlying system uses tokenization, meaning the real card number is never exposed during transactions, increasing security while enabling seamless usage.
The real strategic insight, however, isn’t the wearable itself, but rather the market structure Fidesmo creates. On one side are device manufacturers: companies producing wearables, cards or other connected objects that contain secure elements. These companies want their devices to support payment functionality because it increases the attractiveness of their products. On the other side are financial institutions and payment networks, such as banks, card issuers and payment schemes, that benefit from new channels through which their cards can be used. Fidesmo’s platform links these two sides. It provides the integrations, certifications and business relationships required to make the ecosystem work. As the company itself explains, every new device provider or service partner increases the number of potential collaborations across the network.
This is the classic flywheel of a two-sided market. More devices attract more banks. More banks attract more device manufacturers. And both together attract consumers who can suddenly pay with almost anything they wear.
A similar market structure is emerging in the world of digital advertising. Historically, companies like Burt Intelligence focused primarily on helping publishers, the organizations that operate websites and show advertising, to understand their revenue performance. Burt aggregates and analyzes advertising data from ad servers, supply-side platforms and other systems to create a unified view of campaigns, revenue and performance.
For publishers, this is a significant improvement. Advertising operations often involve fragmented data sources, spreadsheets and manual reporting. Burt consolidates these data streams, automates reporting and provides forecasting and benchmarking capabilities that enable more data-driven decisions about pricing, inventory and campaigns.
But the strategic potential lies beyond analytics. Because Burt collects data from publishers about inventory, performance and campaigns, it also develops insights that are highly valuable to advertisers, the brands and agencies that want to place ads. By expanding its services to this second group, Burt begins to operate as a platform connecting both sides of the digital advertising market.
Publishers gain visibility into which advertisers are likely to perform well on their properties. Advertisers gain insights into which publishers provide the most suitable audiences and inventory. And Burt sits in the middle, providing the shared data infrastructure that enables better matching between supply and demand.
The more publishers use the platform, the more valuable the insights become for advertisers. The more advertisers participate, the more attractive the platform becomes for publishers seeking demand. Once again, the value of the system grows with every participant.
What makes two-sided markets powerful is that they scale differently from traditional software products. A typical enterprise software product delivers value primarily through features. A platform delivering a two-sided market delivers value through connections. Each additional participant increases the opportunity for interactions, transactions and learning across the ecosystem.
In the case of Fidesmo, the interaction is a payment between a bank and a consumer using a device. In the case of Burt, the interaction is the matching of advertisers and publishers using shared data. Both companies, therefore, illustrate a deeper lesson about digital platforms.
The most valuable systems aren’t those that simply automate existing processes; they’re the ones that restructure markets by connecting previously fragmented actors into a single network. Two-sided markets turn software from a tool into a marketplace, and once that marketplace reaches critical mass, it becomes very difficult to displace. To end with a quote from Reid Hoffman: “If you’re not building a network, you’re probably not building a company that scales.”
