“…there is no reason why technology should be limited to computers. Properly understood, any new and better way of doing things is technology.”
💎 Why It Matters
Marketplaces are one of the most powerful business models. They’re hard to build and hard to disruptonce liquidity is reached.
Connecting buyers and sellers may not be enough for a transaction to take place.
Friction, distrust and uncertainty often remain.
Managed marketplaces do more than connect buyers and sellers. They foster transactions with services such as:
- Curation • Toptal connects you to the top 3% of designers, developers, data scientists and more.
- Ratings • Airbnb and Uber use two-way rating systems to churn bad supply and demand. This builds trust at scale.
- Escrow • Remodelmate collects payments from buyers and releases payments to contractors based on project milestones.
- Enrichment • ThredUP adds metadata to items such as size, brand, condition and more. Each detail brings transparency and value to transactions.
- Authentication • GOAT and StockX authenticate items to prevent counterfeiting.
- Inventory Risk • OpenDoor buys homes from sellers in days. Then resells them.
- Insurance • Turo provides up to $750,000 of liability insurance for rentals.
- Standardization • Thumbtack quizzes buyers to get project details. This saves time in providing estimates.
- Reporting • Municibid helps municipalities follow reporting requirements around selling government property.
- Slice • Online ordering for pizzerias
- Remodelmate • A marketplace for home renovations
- Preply • Find or become a language tutor
- MicroAcquire • Buy and sell SaaS companies
- AppSumo • Lifetime deals on B2B software
- BuySellAds • Connecting brands with publishers to place ads
- FundStory • Find non-dilutive financing options
- MentorPass • Matches mentors with mentees to launch and scale businesses
- Found – Find Salesforce developers
- Lemon.io • Find developers fast
- Propulsion Lab • Work with no-code developers to build internal tools
- AI will supplant supply
- Marketplaces will start as communities. Swapstack built a community to help Substack writers cross-promote. Then turned to connecting writers with brands.
- There will be more vertical marketplaces. Chrono24 is a vertical version of StockX, which is more managed than Ebay.
- Solve the chicken and egg problem
- Doing things that don’t scale is the first step to build a marketplace. Andrew from MicroAcquire made countless calls to get the flywheel spinning.
- Use growth tools to build one or more sides of your marketplace. See SaaS-enabled marketplaces like Slice. Groupon began as a blog.
- Go community-first. Swapstack built a community of writers before connecting them with brands.
- Provide a service to one or more sides of your marketplace. Interviewing.io builds supply by giving engineers mock interviews.
- Steal the chicken. Vampire attacks “steal” supply. Airbnb lured hosts from Craigslist. Thumbtack lured contractors.
- Build your marketplace with no-code tools like Sharetribe and Bubble. Code is not the hard part of building a marketplace. Building liquidity is.
- Start in the “white-hot” center. Find the killer app category. Amazon launched with books. Brick and mortar stores are limited by space. Amazon sells long-tail titles.
- Unbundle incumbents. Airbnb unbundled Craigslist. Zeus is unbundling Airbnb.
- Simulate liquidity. Compress activity into one category (Amazon with books), time frame (Nifty Gateway with drops) or location (Uber in SF). Don’t try to boil the ocean.
🔑 Key Lessons
- Marketplaces are energy-intensive endeavors. It takes a lot to start the flywheel.
- “Managed” is a spectrum. Some marketplaces are more managed than others.
- Networks are networks are networks. There are throughlines between marketplaces, communities, currencies, languages and religions. They all have network effects.
- Managed marketplaces go beyond matching buyers and sellers. They assume risk to remove friction.
- Managed marketplaces are paid for increased risk and complexity. The more “managed” a marketplace, the higher the take rate.
“It seems like every marketplace is managed.”
Most are. To some degree.
“Some of these managed marketplaces don’t scale and aren’t investable.”
Contrary to the name, Trends.vc doesn’t cater to VCs. If you don’t need investors, great for you. That’s one less stakeholder type. But many marketplaces mentioned above are billion-dollar companies. Many are scalable and investable. The audio edition talks about this.
“OpenDoor is a reseller. Not a marketplace.”
This is a valid point. We can also throw thredUP in this category. Both take enough inventory risk to call their “marketplace status” into question.
“Vampire attacks are immoral.”
Perhaps. But they’re everywhere. Willful ignorance is dangerous.
📁 Related Reports
- Micro-Marketplaces – See marketplaces from another angle.
- Growth Tools – More ways to solve the chicken and egg problem.
- Audience-First Products – Even more ways to solve the chicken and egg problem.
- DAOs – Examples of decentralized networks.
- DeFi – See the primitives that will replace centralized marketplaces.
- No-Code – More ideas to guide your no-code marketplace journey.
- Paid Communities – Marketplaces and communities have lots of throughlines.
- Micro-SaaS – Focus powers micro-SaaS and vertical marketplaces.
- Referral Programs – Get early users to help you grow by understanding incentives.
- Who runs a managed marketplace? • The tweet behind this report.
- Hierarchy of Marketplaces • How to kickstart a marketplace, build liquidity and dominate.
- Unbundling Craigslist • A map of more than 70 vertical marketplaces unbundling Craigslist.
Thanks to Greg Berry (Municibid), Max Maeder (FoundHQ), Jake Singer (Swapstack), Philip Lakin (Propulsion Lab), Andrew Gazdecki (MicroAcquire), Kenny Hanson (MentorPass), Chikodi Chima (Moonshot), Rick Segal (CRAAG Angel Group), Stewart Townsend (Channel as a Service), Jacob Lim and Alexandre Durand-Chabert (Airparty). We had a great time jamming on this report.
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- 19-minute audio episode with exclusive managed marketplace stories, insights and opportunities.
With Trends Pro you’ll learn:
- (📈 Pro) What are some Consumer-to-Consumer (C2C) managed marketplaces?
- (📈 Pro) What are member-owned marketplaces?
- (📈 Pro) Will technology supplant “jobs” done by marketplaces?
- (📈 Pro) How are Airbnb and Uber churning bad supply and demand at scale?
- (📈 Pro) Who’s using AI to scale the “unscalable” parts of their marketplace?
- (📈 Pro) How do managed marketplaces affect middlemen?
- (📈 Pro) What does decentralization mean for managed marketplaces?
- (📈 Pro) How to kickstart and scale a marketplace business?
- (📈 Pro) When is a managed marketplace no longer a marketplace?
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