Consumer Marketplace Fundamentals (Cornell Johnson School 2013)

Fundamentals of consumer marketplace business models [ 11 factors to identify and execute successful consumer marketplaces ]

[email protected] www.rishidean.com

Current Topics in Marketing (11/26/2013)

FIX Creating a consumer

marketplace

Lessons learned from Sittercity

Rishi Dean www.sittercity.com

Why me?

The long, winding road

Started / Ground Floor

Advise / Volunteer

Currently

3 Rishi Dean – www.rishidean.com


That doesn’t make me an “expert”


…only a guide

Why this topic?

Your best bet to make $1 billion

~20 years of consumer internet

24 public companies >$1B x 2 for acquisitions

~2 multi-billion dollar companies / year

2/3 are “marketplace” businesses Source: James Slavet, Greylock


Why now?

Our economy is fundamentally

shifting


P2P marketplaces can reduce “economic slackness” (unemployment)


Today…

Intro & academic underpinnings

Keys to building P2P marketplaces

Sittercity case

Presentations / Feedback / Epilogue

1

2

3

4


Marketplaces are the foundation of

the internet


The internet makes markets efficient


Commerce eBay, Craigslist, Amazon Marketplace, …

Auto Uber, Lyft, RelayRides, …

Child Care Sittercity, Care, …

Dating Match.com, eHarmony, okCupid, …

Custom Goods CustomMade, Etsy, …

Examples

Errands TaskRabbit, Zaarly, Exec, …

Travel Airbnb, Expedia, Priceline, …

Skills oDesk, Skillshare, …


Not all marketplaces are created equal

Transaction initiator Buy-side? Sell-side? Combo?

Transacted item Product? Service? Commodity?

Market scope Horizontal? Vertical? Niche?

Revenue model Subscription? Transaction?

Pipes vs. Platforms?*

Inspired by: @sanguit http://platformed.info/why-‐business-‐models-‐fail-‐pipes-‐vs-‐platforms/


Dominant Offline “Create & push”

B2B / B2C

Dominant Online “Facilitate interactions”

P2P / B2B

Since we’re at school, let’s look at the theory: Platform economics


2-sided network incentives


Demand Supply

1) Initial Adoption

1) Initial Adoption

2) Same-side

Effects

2) Same-side

Effects

3) Cross-Network Effects

o  Why do buyers initially adopt?

Phase 1: Initial Adoption

o  Why do sellers initially adopt?

o  How do more buyers help one another?

Phase 2: Same-side Effects

o  How do more sellers help one another?

o  Increase in liquidity Phase 3:

Cross-side Effects o  Increased liquidity

Strategies for Two-Sided Markets HBR ARTICLES | Thomas R. Eisenmann, Geoffrey Parker, Marshall W. Van Alstyne | Oct 1, 2006

Platform

Consumer marketplaces are special cases of these platforms

Strategies for Two-‐Sided Markets HBR ARTICLES | Thomas R. Eisenmann, Geoffrey Parker, Marshall W. Van Alstyne | Oct 1, 2006


…almost every massively successful tech business is a platform, many of those are marketplaces


Keys to building online P2P

marketplaces



1) Industry Selection Putting the odds in your favor


Characteristics of good industries

Big

Ripe

Plentiful


Addressable customers

Frequency of transaction

Transaction size

Potential amount transacted via the platform is large


Consolidate fragmented markets

Economic empowerment

Deliver new enhanced experiences

Markets primed for disruption


“Ownable” network effects

Groups who interact

More users = more value

Scale matters

Can own it

2) Network Initialization Gaining traction


3 keys of gaining initial traction


¡ Adoption

¡ Liquidity

¡ Pricing


10x value proposition

“Prime the pump”

Lock in scarce supply

Attract users and provide instant utility

Onboarding + Activation


Liquidity: users can find what they’re looking for

Substitutes

Price dispersion

Market segmentation

Pricing


Capture value commensurate with what you create

Sources of revenue

Side of subsidy

Payment scheme

Output costs

3) Service Design Sustainability


3 levers of sustainability


¡  Control

¡  Scale

¡  Competition


Control of the customer lifecycle

Intermediate the transaction

Avoid defection

Repeat behavior

Data cycle


Scaling up within and across segments

Markets & segments

New market setup

Low friction vs. leverage

Community-driven


Creating long-term advantage

Winner take all?

Share or fight for control?

Threat of envelopment

Switching costs

Opportunities Ahead



Mobile

Follow the customer

Location / Proximity

Immediacy

“Moment of truth”


High-consideration services

Trust first

Offline first

Reputation

Social graph

Takeaway: “Ownable Network Effects”

¡  Backbone of the internet & the most lucrative consumer biz model

¡  1) Select an attractive industry §  Big market by expected total transaction volume

§  Ripe for technology-enabled consolidation §  Plentiful to attain and own the network effect

¡  2) Gain initial traction §  Adoption: overcome “chicken & egg”

§  Liquidity: expectation you can find what you’re looking for §  Pricing: capture value commensurate with what you create, but allow for growth

¡  3) Protect & grow the platform §  Control: ensure value across all touch-points of customer lifecycle §  Scale: Cost-effective expansion into new markets / segments / verticals

§  Competition: Create a “moat” around the castle with high switching costs and lockout

¡  4) Opportunities ahead §  Mobile: Always on systems for ad-hoc marketplaces based on proximity & affinity §  Social / Trust: Unlock high consideration P2P verticals



Thanks to you Be safe, have fun!

I’m here to help


¡  Email: [email protected] ¡  Blog: rishidean.com ¡  Twitter: @rishidean

¡  Sittercity: sittercity.com ¡  Twitter: @sittercity

Sittercity:

Fundamentals of consumer marketplace business models [ 11 factors to identify and execute successful consumer marketplaces ]

[email protected] www.rishidean.com

Current Topics in Marketing (11/26/2013)

FIX Creating a consumer

marketplace

Lessons learned from Sittercity

Rishi Dean www.sittercity.com

Consumer Marketplace Fundamentals (Cornell Johnson School 2013)

Marketing

Transcript of Consumer Marketplace Fundamentals (Cornell Johnson School 2013)