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Lessons from Three $B+ GMV Marketplaces
acrowdedspace.com
Jackson Square Ventures | Confidential | 3
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Marketplace Checklist
☑ Productivity gains
☑ Massive existing (inefficient) market
☑ High fragmentation on both sides
☑ In the payment flow
☑ Frequency (recurrence) of usage
☑ Irregular / non-monogamous usage
☑ Standardization possibilities
☑ Network effects on quality, cost, speed
☑ Market expansion (unlock new supply / demand)
☑ No disintermediation possible
Ideal marketplaces have al
l of these
characteristics.
Some of these can
be deal-killers
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☑ Productivity gains
☑ Massive existing (inefficient) market
☑ High fragmentation on both sides
☑ In the payment flow
☑ Frequency (recurrence) of usage
☒ Irregular / non-monogamous usage
☒ Standardization possibilities
☑ Network effects on quality, cost, speed
☑ Market expansion (unlock new supply / demand)
☑ No disintermediation possible
Marketplace Checklist
Nannies
6. Jackson Square Ventures | Confidential | 6
Marketplace Checklist
☑ Productivity gains
☑ Massive existing (inefficient) market
☒ High fragmentation on both sides
☒ In the payment flow
☑ Frequency (recurrence) of usage
☑ Irregular / non-monogamous usage
☑ Standardization possibilities
☑ Network effects on quality, cost, speed
☑ Market expansion (unlock new supply / demand)
☑ No disintermediation possible
Aircraft Maintenance
7. Jackson Square Ventures | Confidential | 7
Marketplace Checklist
☑ Productivity gains
☑ Massive existing (inefficient) market
☑ High fragmentation on both sides
☑ In the payment flow
☒ Frequency (recurrence) of usage
☑ Irregular / non-monogamous usage
☑ Standardization possibilities
☑ Network effects on quality, cost, speed
☑ Market expansion (unlock new supply / demand)
☑ No disintermediation possible
Locksmiths
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Frequency of Purchase
Size of
Transaction
Plumbing
Vertical
(HighFrequency)
Vertical
(HighPrice)
Horizontal
Locksmith
Sporting
Goods
Furniture
Flights
Hotels
Taxi
Meals
Homes
Cars
Clothing
Horizontal
B2B
Horizontal vs.
Vertical
Verticalize (buyer picks for high price) / (supplier picks for high frequency)
Or group categories in horizontal; Or build a B2B platform
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50%
0%
20%
High Rakes --Managed marketplace, monopoly
(iOS), opacity
Tiny – Long term, regularwork,users meet in person,
paymentoff-platform
Med – Quality control, insurance,compliance, scheduling
and availability
Low – Transparentfees, buyerbeware, high price goods /
services
Rake
Factors
High rake not necessarily better, just different
More marketplace management – more rake
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Match Types
Upwork,Craigslist
Airbnb,Zillow
Uber,Rev
SupplierPicks
Commodity
Increasing
Fill Ratio
Buyer
Buyer
Buyer
Supplier
Supplier
Supplier
Buyer Picks
Variety
Double Commit
Complex, custom stuff
Marketplaces evolve to increasing fill ratio
Supplier picks is easiest way to approach 100%
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Virtuous Cycles
Lots of time here
Ineffective
Attract OptimizeScreen
Not much time here
Veryeffective
Retain
Expel
Quality is never static (will increase or decrease)
Don’t waste too much time screening; Invest in O.R.E
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Desperation
Curve
Desperation
Willingness to
jump through
hoops
LowQuality
HighQuality
Hurdles can actually lower quality
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Teach Your Users
• Display successful transactions
• Match new and repeat users
• Use community forums on your site
• Have employees onboard every week
All marketplaces are different and have a learning curve.
Pay attention to the onboarding experience
Craft a different experience for newbies and repeats
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Network Effect in
Marketplaces
Quality
Market Penetration
MaxNetworkEffects
Reality Cost
Market Penetration
Uber
UberX
UberPool
Driverless?
Network effects often plateau
Reinforce with new service offerings
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Tiering Marketplaces
The classic 80/20 rule where 80% of the
activity might come from 20% of your
users.
Segment users to reward and retain the most active users
Make it easy for the best users
20%
USERS
80%
ACTIVITY
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Disintermediation
Users often seek the best financial outcome
Either increase value or decrease fee over time
Time
Perceived Value
Total
PerceivedValue
FlatFee
Disintermediationhappens
here
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Feedback and False
Signals
0% 20% 40% 60% 80% 100%
Yelp
oDesk
Amazon (Books)
Amazon (Toys)
5
4
3
2
1
Beware of false signals
Ask for private feedback, 3 point scales, and use behavioral data
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Fraud
Curve
Time
% of Fraudulent
Transactions
The
Beginning
First
Fraud
Over-
correction
Steady State
Trust and safety is a part of every marketplace
Zero fraud is bad -- means you’re underinvested in growth
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Master
Marketplaces
Master
Commodity
PayforAccess,
Expertise
Buyers
PayforCostSavings,
Speed,Convenience
Suppliers
ValuePrestige,
Brand,Reputation
ValueEarnings,
Convenience,
There is a new emerging class of marketplace
Master marketplaces must be designed differently
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Liquidity Hacking
Find Aggregators
• Physical (office / campus) – Zesty
• Enterprise client – Gigwalk, Wonolo
• Scrape – Craigslist
Provide Value to One Side – Github
Narrow your Focus – OfferUp
Curation (reduce options) – YourMechanic
Brute Force (do things that don’t scale) - oDesk
Solving the liquidity problem is the most important challenge
Figure out your liquidity hack