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Key points for building market places
- The only thing that matters: Build liquidity – the first one there wins
- sellers can expect their items will sell
- buyers can expect to buy items at price they can accept
- cross side network effects – one side drives the other side
- Always start with building building Supply first
- seek out inefficient, fragmented markets that you can roll up
- look for fragmented + high friction for supply sign up
- pick method that works for your target market
- Methods
- trojan horse strategy – provide immediate value through the offer of the use of a tool – SAAS model
- can help bootstrap the project
- Eventbrite was a event management SAAS model before it became a market place for events
- Manual hack #1 – Yelp
- Web crawling
- Clean data and categorize
- pull out key insights and distribute
- upload data into directory and invite service providers to claim their profiles
- Brute force
- Plug into existing liquid network
- PR + timing
- get customers to promote your brand
- Challenges
- In the short run supply is always the challenge
- In the long run demand is the bottleneck
- Network effects create virtually impenetrable barriers to entry
- retention grows
- increasingly attractive economics
- reaching scale as fast as possible matters
- Competition
- horizontals are going vertical
- horizontals that fail to go vertical lose market shares – craiglists
- moving forward focus on building niche networks
- technology shifts sometimes open new windows to attach horizontal market positions
- Winner either take most or takes all
- Operations
- track satisfaction / separate NPS for both supply and demand side
- more satisfied demand side drives growth
- very powerful dynamic:
- look for overlap between buyers and sellers
