These “free” features are only available for sales through the marketplace. For example, sellers on, a vertical marketplace for gift cards, get a comprehensive dashboard including their sales, their best selling cards and average selling time by brand. When a marketplace begins to add features for either buyer or seller independently, it becomes even more valuable. Provide “network agnostic” value: Most of the value any marketplace adds is its “network value” – the connections the marketplace enables between its networks of supply and demand. It also allows the marketplace to monitor conversations for abuse, fraud, and hints of disintermediation.ģ. Capturing communication on the platform adds value as long as it’s done in a low-friction way, because all of the details regarding a particular transaction can be found in one place. Similarly, Uber invisibly provides drivers and passengers each with a temporary Twilio phone number, which doesn’t work afterwards (preventing the passenger from calling a specific driver at a later time or vice-versa). Even trying to give your last name (so someone could look you up on LinkedIn or Facebook) is often blocked. Any attempt to do otherwise is cleverly blocked: Phone numbers in messages are detected and erased, and so are email addresses. Own buyer/seller communication: If a traveler wants to book an Airbnb room, there is no choice but to communicate via the Airbnb messaging tools. Setting the right rake discourages buyers and sellers from circumventing the marketplace, and it discourages sellers from artificially inflating prices to account for the rake – a practice that could lead to an unsatisfactory buyer experience.Ģ. It’s harder to charge a high rake in a marketplace where the seller knows the identity of the buyer because there’s more risk of disintermediation, so fees must be set appropriately low. Crown and Caliber) and low-rake marketplaces where the seller’s identity is exposed to the buyer (as with Tradesy). The general theory is that there are high-rake marketplaces where the buyer doesn’t know the seller (e.g. Set the right rake: Determining the right commission for your marketplace is more of an art in experimentation and competitive positioning than a science. Through our experience investing in several pioneering marketplace companies, we have observed a handful of clever ways to fight disintermediation:ġ. Transactional and end-to-end marketplaces must deter (or, even better, prevent) disintermediation to protect their revenue stream. If a buyer and seller are able to conduct their transaction “off the marketplace,” they can avoid marketplace fees altogether. Listings on a transactional marketplace, on the other hand, are typically free to post, so a marketplace like Airbnb doesn’t get paid until a transaction is completed. It’s difficult to disintermediate a simple listing site like Craigslist because Craigslist charges for listings and, therefore, monetizes the instant a listing is posted. finding a host on Airbnb and then arranging a stay with them directly). One key risk facing the operators of transactional and end-to-end marketplaces, however, is the threat of disintermediation, which happens when a buyer chooses to work directly with a seller instead of using the marketplace platform (i.e. Most early Internet marketplaces like Craigslist were simple listing services, but more compelling transactional and end-to-end models are emerging, and we expect them to dominate over time. Internet marketplace businesses (ranging from Craigslist to eBay to Airbnb, among many others) earn fees for connecting buyers and sellers. Join top executives in San Francisco on July 11-12, to hear how leaders are integrating and optimizing AI investments for success.
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