Where Supply meets Demand.
You are reading the free version of I/O Marketplaces. You can get the full report here.
NoCode and other SaaS tools democratize building startups, allowing people to build businesses around their unique passions. Authenticity defines the niche of companies like Notion Everything.
The Assetization Paradigm
Marketplaces like AirBnB and Envato help people turn product and property into money-making assets, both peer-to-peer and creator-to-consumer.
The Freelancer Economy
47% of Millennials and Gen Z are freelancers today. By 2027 freelancers will account for >50% of the work force. Every single, granular, subcategory on a platform like UpWork is a potential standalone marketplace.
Consumers want frictionless access to (niche) products or services from multiple suppliers, without loss of quality.
Consumers are Scattered
Billions are being spent in marketing and advertising trying to reach customers across a multitude of channels. Your target audience doesn't congregate automatically.
Suppliers never know who they will deal with. Service providers in particular can face misbehaviour, destruction of property, etc.
Suppliers want to get paid, and get paid on time. Also, they want to have some stability of income.
Suppliers are Scattered
Consumers can spend hours looking up, contacting and comparing different suppliers. Platforms solve this.
It is difficult for consumers to estimate product-/service-quality up front. This creates uncertainty.
Consumers face the risk of paying for something they will never get. Platforms reduce scammers.
Marketplaces connect supply and demand of a (niche) product or service.
Supply & Demand Platform
Marketplaces offer a platform where supply and demand can list, communicate, and complete (protected) transactions.
Curation & Matchmaking
Marketplaces assist in filtering and matchmaking of the right solution
Two-sided Quality Control
Through rating systems and otherwise, marketplaces can uphold a certain quality standard for both supplier and consumer.
Marketplaces are a platform to exchange value. By controlling the transaction they reduce risk on both payment- and delivery-side.
Consistent User Experience
Marketplaces equalize the user experience of transactions, creating a sense of confidence and trust on both sides.
Biggest cost driver is acquisition, which can be lowered by making smart use of of WOM. High in manual labour early.
You're dealing with two-sided acquisition – practically building two businesses rolled into one. So expect high complexity.
The barrier-to-entry is high because of Difficulty. Once you cross that barrier you are "safe". There is a risk of copycats however.
Increased Process Efficiency
Removing friction from an existing transaction boosts user happiness and can set you apart like Uber ordering & payment vs traditional Taxis.
Aggregate a Fragmented Market
The more fragmented the market, the higher the value of an aggregation platform. Focus on a fragmented market.
Curate High Quality Solutions
Actively manage quality standards on your marketplace. If matchmaking is involved, match to the fastest, cheapest, highest quality supplier.
The more one side grows, the more value it creates for the other side. Same-side it actually causes negative network effects, f.i.: More Uber drivers = lower earnings.
Type: Network Effects
Barrier to Entry
Marketplaces are hard to build, and therefore inherently defensible. If successful, you can provide sole access to a scarce resource: sellers and buyers.
Type: Cornered Resource
Marketplace success depends on Monopoly. The more scalable your marketplace, the faster you can capture market share, and control the price.
Type: Economies of Scale
1 more in the Pro Report.
"Building a marketplace is a relentless pursuit of exceeding expectations to create happiness." – Sarah Tavel
How to make money?
Fee for Service
Charge a fee on top of every transaction for use of the platform.
Pay per Use
Charge for an increment of use, f.i. by the minute, by the mile, or both.
Allow third parties to claim screen real estate on your platform for advertising.
How to scale money?
(Sub-)Contracts Profit on work you sell, but others deliver.
Marketplaces want to be market-leaders by a wide margin, so they can set price instead of competing on it → It's a high-risk business.
Go-to-Market Strategy 🛫
How to find and attract users?
by Category and/or Geography. GOAT spun out an overlooked niche on eBay, and was able to set itself apart with an "Assurance of Authenticity".
Solve Chicken ←→ Egg Problem
Most successful marketplaces focused on supply first. They found supply drives demand. At Etsy, suppliers were the buyers as well.
Most marketplaces fail for lack of supply, not demand. Sell suppliers on projected demand and reduction of friction.
Funnel consumers to your platform and let the transactions take place. Optimize for a great first experience first.
Cheat Codes 🎮
How to accelerate the Go-to-Market?
Create Look-a-like Audiences
If something is working in suburbs, expand to other suburbs, not city centers.
Taskrabbit focused on their most popular category: handyman work.
Target traffic on existing (inferior) platforms and funnel them to your platform.
Side Product Marketing
OpenTable created a digital booking tool that could stand on its own without the demand side, to onboard early suppliers.
Accelerate WOM w/ Referrals
Referrals drove 1/3 of the demand side for companies like Uber and Instacart. Remove barriers for people to talk about your product and reward them for it.
4 more in the Pro Report.
"The way to think about referrals is sort of an engineered word of mouth. (...) One way could be just making it easier. Another way could be by using financial incentives.” – Gustaf Alströmer, AirBnB
Via: Lenny Rachitsky
Buy the Pro Report for even more Online Community Startup Insights.
What you get:
- Validation: How to test the potential of your marketplace low-risk.
- MVPs: How to build & launch your community fast & cheap.
- Key Metrics: How to measure marketplace performance.
- Dream Team: What your ideal startup team looks like.
- Risks: How to avoid failure with your marketplace
- Responsibility: How to run a responsible marketplace.
- BONUS: +2 Business Models, +4 Cheat Codes, +2 G2M Strategies, +1 Moats & +2 USPs.
👋 That's all, peeps!
See you next time.
⚡️ Need help launching your Marketplace startup? Check-out our startup coaching , and venture building offering.
For this report, I happily made use of the resources below. Lenny's Newsletter in particular has been of tremendous value. Go check it out!
- https://everythingmarketplaces.com/#freeresources by @Yoroomie