

Solving the "marketplace" business model - wisp
http://blog.asmartbear.com/marketplace-business-model.html

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jasonlbaptiste
This post should be placed under an entrepreneur's must read list. We're doing
a marketplace play with Cloudomatic and it was really re-assuring (and scary)
to hear some things we've seen echoed.

a) Building two businesses is really scary.

b) Focus on sellers first is definitely right. You'll never have any buyers if
you don't have any sellers. The worst case scenario for a seller if there are
no buyers is an increase of zero / a loss of nothing. Things can only go up.

c) Pay per lead works great here. The listing fee up front is hard to do and
usually penny wise + pound foolish. We have close to 500 apps. I bet if we
tried to charge a small 50 dollar fee to be on cloudomatic we might have
gotten it from some devs, but we'd have a lot less apps (maybe 25 total?).

d) Content is really important as a way to gain traffic on the buyer side. It
worked well for Mint. I consider Mint to be a marketplace at its core (connect
people (buyers) with better finance deals (sellers)).

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ozres1
Great article. Wish I read it earlier. I started a company (graduate jobs
board) which failed remarkably. I had no idea the extent of difficulties I
would face. The hardest thing was getting the "buyers" - i.e. the employers -
to advertise. The "sellers" - the graduates & students - was a piece of cake.
1,000 users in a couple of months. But without buyers, the whole thing was for
naught. The other thing I noticed in the "marketplace" business model is that
the leader is able to reinforce their market position and take the lion's
share of the market. It's very difficult you're up against a competitor like
that but if you're establishing yourself to be the leader and succeed, it's
extremely profitable. The CEO of Australia's leading job site, seek.com.au,
commented that unless you have market leadership in "marketplace" business
models, it's not worthwhile.

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alain94040
Excellent article. If you are starting a company that is a marketplace, you'd
better read this first. Really. I forwarded it to a few people I know who
are...

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spokey
All in all a great article, but I'm confused about why the small and quirky
argument ("marketplace enormity doesn't increase the pleasure of the buyer")
applies to Etsy or Threadless but not to Craiglist or EBay. If I'm in the
market for miniature porcelain cows ironically dressed as farmers and find
them on EBay, what do I care if EBay has 3 other listings or 3 million?

I understand that at their current level of maturity the value of EBay and/or
Craiglist is partially tied to the size of the marketplace and that focused-
and-better may be the best or even only way to compete with them but it seems
like on that particular point what works for you, the small emerging
marketplace could work just as well for them, they just have a higher overhead
to meet. It's not enough just to be more focused, you need to be _better_ at
your niche.

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mmorris
>> "marketplace enormity doesn't increase the pleasure of the buyer"

You're asking why it's a negative for eBay and Craigslist that they aren't
small (i.e., that they have a lot of listings), but I think the quote you took
from the article is saying the inverse - that it's _not_ necessarily a
negative for Etsy and Threadless that they _are_ small. In fact, I think Jason
does recognize that being bigger is an advantage:

>> "Clearly the value of a marketplace increases as it grows — both as a
business and to the buyers and sellers."

As to your second paragraph, I agree it comes down to you meeting the needs of
your niche in some way that is better than the way the big boys are doing it
(that is, of course, if you are competing directly with them). There is
nothing, in principle, stopping them from replicating whatever you do to
create an advantage. And you certainly won't win _just_ because you have a
smaller market. But there are a lot of products (like the t-shirts on
Threadless) where relative obscurity increases the value of the product. There
will always be consumers who shy away from the mainstream offerings, in some
cases _because_ the offerings are mainstream.

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lionheart
Great article. Amazingly, I didn't realize that my startup was a marketplace
until reading this.

