How to Kickstart and Scale a Marketplace(lennyrachitsky.com)
lennyrachitsky.com
How to Kickstart and Scale a Marketplace
https://www.lennyrachitsky.com/p/how-to-kickstart-and-scale-a-marketplace
51 comments
One of the major worries that I've had when launching our marketplace was poaching; What if clients (the demand side) decide to hire developers (the supply side) outside of our platform? Of course, we had rules against that in terms of service, but hey, circumventing those is not a big risk.
But, luckily for us, the value that we provided to both parties (and still do) outweighed the risk of losing their accounts for violating TOS, so we very rarely see that.
Regarding chicken and egg problem, we manually found and pre-screened 10 people to provide supply in advance, so when the first client came, they'd have someone to hire. Earned $13 the third day after launch. Happiest day ever :)
Today we have 19 employees and are profitable (we've hit profitability the third year, we're now 7 years "old"). https://codeable.io
But, luckily for us, the value that we provided to both parties (and still do) outweighed the risk of losing their accounts for violating TOS, so we very rarely see that.
Regarding chicken and egg problem, we manually found and pre-screened 10 people to provide supply in advance, so when the first client came, they'd have someone to hire. Earned $13 the third day after launch. Happiest day ever :)
Today we have 19 employees and are profitable (we've hit profitability the third year, we're now 7 years "old"). https://codeable.io
"the value" -- here it is when one moves from providing value to rent extracting behaviour, one should have really big walls surrounding the market - and really unappealing alternatives.
Of course, we had rules against that in terms of service,
but hey, circumventing those is not a big risk
> "In one rare, fascinating, and deliberate case, Thumbtack decided to eschew any constraint"
For the record, the eschewing of any constraints was due to a combination of naivety and then later stumbling upon a successful method of "driving initial supply" rather than any sort of deliberate decision of the best way to build a marketplace. Sander's blurb is actually quite well phrased, and he does not take any undue credit for the prevailing thinking at the time, but it is all ex post facto analysis.
Very enjoyable article though. Will be interested to follow along.
For the record, the eschewing of any constraints was due to a combination of naivety and then later stumbling upon a successful method of "driving initial supply" rather than any sort of deliberate decision of the best way to build a marketplace. Sander's blurb is actually quite well phrased, and he does not take any undue credit for the prevailing thinking at the time, but it is all ex post facto analysis.
Very enjoyable article though. Will be interested to follow along.
I haven't read anything profound or non-obvious on this topic and there's a lot written about it.
The one thing I have learned creating and trying to get a 2 sided marketplace off the ground (https://gearoffer.com) is that it's excruciating, painful and nearly impossible.
The one thing you must have is perseverance. A lot of perseverance.
The one thing I have learned creating and trying to get a 2 sided marketplace off the ground (https://gearoffer.com) is that it's excruciating, painful and nearly impossible.
The one thing you must have is perseverance. A lot of perseverance.
I can try to distill some of my own musings. I don’t know if they’re obvious or not.
1. Before launching a marketplace, grow a community interacting around content you get from free sources (or via a subscription) such as youtube, the web, restaurants, books etc.
2. Then link to existing marketplaces of sellers via an API (eg Amazon affiliates, OpenTable, Ticketmaster etc.)
3. Once you have enough people, build a more vendor-friendly sales process, reach out to vendors and see if they would list on you directly. Sometimes their contracts don’t allow them (eg with ticketmaster).
Now if you are intent on building a community from scratch, you will still need:
1a. A policy of subscribing to interests during onboarding (eg like with meetup.com) and telling people that they’ll get notifications as things are posted.
1b. Initially showing infinite scroll of ALL matching group activities around the user, with filters to filter it down by categories that have at least 1 result, so it never looks like a ghost town in most categories.
1c. Have subcommunities based on eg zipcode or city and let people grow them. For an example see https://yang2020.app/communities
1d. Have a system of credits users can earn for referring new users to the app.
1e. Leaderboard system per zipcode / week, who has the most credits. The leaders get some badges (digital goods) or even some real world goods.
Disclaimer: at https://qbix.com we build software for exactly this. Your job is to come up with the community idea, get the content license, get the various subcommunities, and we do the rest. We built https://yang2020.app for example, for Yang Gangs to unite. It lets you organize a local event/rally, rides to and from the event, checkins, and also uses some of the later Web features that finally work on all mobile browsers, like PaymentRequest (to pay for tickets) and WebRTC (to videochat or even screenshare). If you’re a developer it’s open source so you can grab it at https://github.com/Qbix/Platform and just build whatever on it.
1. Before launching a marketplace, grow a community interacting around content you get from free sources (or via a subscription) such as youtube, the web, restaurants, books etc.
2. Then link to existing marketplaces of sellers via an API (eg Amazon affiliates, OpenTable, Ticketmaster etc.)
3. Once you have enough people, build a more vendor-friendly sales process, reach out to vendors and see if they would list on you directly. Sometimes their contracts don’t allow them (eg with ticketmaster).
Now if you are intent on building a community from scratch, you will still need:
1a. A policy of subscribing to interests during onboarding (eg like with meetup.com) and telling people that they’ll get notifications as things are posted.
1b. Initially showing infinite scroll of ALL matching group activities around the user, with filters to filter it down by categories that have at least 1 result, so it never looks like a ghost town in most categories.
1c. Have subcommunities based on eg zipcode or city and let people grow them. For an example see https://yang2020.app/communities
1d. Have a system of credits users can earn for referring new users to the app.
1e. Leaderboard system per zipcode / week, who has the most credits. The leaders get some badges (digital goods) or even some real world goods.
Disclaimer: at https://qbix.com we build software for exactly this. Your job is to come up with the community idea, get the content license, get the various subcommunities, and we do the rest. We built https://yang2020.app for example, for Yang Gangs to unite. It lets you organize a local event/rally, rides to and from the event, checkins, and also uses some of the later Web features that finally work on all mobile browsers, like PaymentRequest (to pay for tickets) and WebRTC (to videochat or even screenshare). If you’re a developer it’s open source so you can grab it at https://github.com/Qbix/Platform and just build whatever on it.
Amazing research. I'd say, many people underestimate the phase of "1: Crack the chicken-and-egg problem ".
I think there are 3 ways to do that:
1) Investing a lot of money in ads and PR (many people won't have the resources)
2) Being the first one in a niche with high demand (e.g. AirBnb)
3) Staying afloat long enough to get enough traction.
I've been bootstrapping a software marketplace for quite some time now - https://www.saashub.com. A side-project initially and going full-time for the last few months. I can share, and believe, that SaaSHub is on the verge to crack the egg :) . It had 10k page-views yesterday. My expectations are that once it gets to 50-100k page-views a day, it would have cracked problem #1. Time will tell.
I think there are 3 ways to do that:
1) Investing a lot of money in ads and PR (many people won't have the resources)
2) Being the first one in a niche with high demand (e.g. AirBnb)
3) Staying afloat long enough to get enough traction.
I've been bootstrapping a software marketplace for quite some time now - https://www.saashub.com. A side-project initially and going full-time for the last few months. I can share, and believe, that SaaSHub is on the verge to crack the egg :) . It had 10k page-views yesterday. My expectations are that once it gets to 50-100k page-views a day, it would have cracked problem #1. Time will tell.
You're working on this full time? It looks like this site isn't monetized at all. Did I miss something?
There are featured listings with a monthly subscription.
I'm working full-time on a project without any monetization. I have a little bit of savings but live frugally so my runway is more or less infinite.
Your website is a directory, not a marketplace.
Mate, did you read the article? You have AngelList given as an example of a "Marketplace". How is AngelList more a marketplace compared to SaaSHub?
What should I change to make it a marketplace?
If I were to sign up and say I want a cloud backup service, and several cloud backup service providers give me quotes, and I can pick one and pay for it right then, that's a SaaS marketplace. You've connected buyers and sellers, creating transactions on your site.
A self-made list of companies, nobody needs accounts, you can't buy anything just click links to external websites... that's a directory. It's the Yellow Pages. And your business model of selling featured listings is the same as the Yellow Pages.
A self-made list of companies, nobody needs accounts, you can't buy anything just click links to external websites... that's a directory. It's the Yellow Pages. And your business model of selling featured listings is the same as the Yellow Pages.
I dunno. Here it is the definition from the article:
"A marketplace business is one that (1) connects demand (i.e. people who want a thing) with (2) supply (i.e. people who have that thing), and (3) leads to a financial transaction. These businesses do not generally own any supply, do not provide products or services directly, and (eventually) handle the money being exchanged. Simply put, their job is to provide a platform where the supply and demand efficiently find each other and transact successfully."
There's demand, supply and people eventually transact. The only missing part is handling the exchange of money.
Let's take a Sunday Farmers' Market, for example. It's a marketplace happening in the backyard of your school. That marketplace provides the platform for people to exchange goods and services and does not do anything related to money exchange. It just sells market spots to the farmers.
"A marketplace business is one that (1) connects demand (i.e. people who want a thing) with (2) supply (i.e. people who have that thing), and (3) leads to a financial transaction. These businesses do not generally own any supply, do not provide products or services directly, and (eventually) handle the money being exchanged. Simply put, their job is to provide a platform where the supply and demand efficiently find each other and transact successfully."
There's demand, supply and people eventually transact. The only missing part is handling the exchange of money.
Let's take a Sunday Farmers' Market, for example. It's a marketplace happening in the backyard of your school. That marketplace provides the platform for people to exchange goods and services and does not do anything related to money exchange. It just sells market spots to the farmers.
Like all of the examples, a Sunday Farmer's Market has a chicken-and-egg problem in that it doesn't work without a critical mass of both supply and demand, buyers and vendors. Buyers don't want to go to a market without vendors, vendors don't want to set up in a market without buyers.
A directory has no chicken-and-egg problem. You have a list of businesses, who don't have to set up at your market at all since there isn't one. Any buyer that shows up at your directory can get value from it, since you're just pointing them to the business somewhere else.
You facilitate no transaction. You're not even transaction-focused, you're research-focused, with reviews and alternatives and all that. Vendors don't have to set up in your market, you can simply create their listing for them since it's just a directory. You're the Yellow Pages, not the Farmer's Market.
There's nothing wrong with that, but this series of articles doesn't apply to your site, as it's not a marketplace.
A directory has no chicken-and-egg problem. You have a list of businesses, who don't have to set up at your market at all since there isn't one. Any buyer that shows up at your directory can get value from it, since you're just pointing them to the business somewhere else.
You facilitate no transaction. You're not even transaction-focused, you're research-focused, with reviews and alternatives and all that. Vendors don't have to set up in your market, you can simply create their listing for them since it's just a directory. You're the Yellow Pages, not the Farmer's Market.
There's nothing wrong with that, but this series of articles doesn't apply to your site, as it's not a marketplace.
Is AngelList a "marketplace" or a "directory"?
I don't use their site, and we're not talking about it, we're talking about yours. There are no internet police that are going to come arrest you for calling your directory a marketplace if that's the branding you prefer. No need to be defensive, continue on.
A marketplace. It connects startups with angels and job seekers.
Out of curiosity - why the downvotes :)?
I didn't downvote you, but as a tangent, on your /about page you say:
> I won a 3rd place (missed the first one because of a careless mistake)
and I found this kind of funny, because the only reason I could get to your about page was by stripping the ".html" from the actual link on your website. This is not a blanket judgment of your character; but you may have a quality control issue.
> I won a 3rd place (missed the first one because of a careless mistake)
and I found this kind of funny, because the only reason I could get to your about page was by stripping the ".html" from the actual link on your website. This is not a blanket judgment of your character; but you may have a quality control issue.
I'm not sure what you are talking about ¯\_(ツ)_/¯
On your home page, click the "about" button, you get a 404.
His about page doesn't 404. Nor does it contain the text you quoted in your previous reply and his main page does not link to /about.html.
In fact even if you deliberately add .html to the about page URL it just redirects to /about anyway, which makes your comments even more baffling.
In fact even if you deliberately add .html to the about page URL it just redirects to /about anyway, which makes your comments even more baffling.
I believe he is talking about http://stanbright.com/ (not saashub.com) which is listed in stanislavb's HN profile which does indeed exhibit these problems.
Ah thanks, I was totally confused by this discussion and curious what it was all about.
At first I thought rabidrat was just trolling/joking, but their other comments seemed legit, so wondered if they meant the site in the OP or they had a virus or his site had been hacked.
I even Googled the quoted text, but it just brings up the HN comment. Just didn't think of clicking the profile.
At first I thought rabidrat was just trolling/joking, but their other comments seemed legit, so wondered if they meant the site in the OP or they had a virus or his site had been hacked.
I even Googled the quoted text, but it just brings up the HN comment. Just didn't think of clicking the profile.
No problem. I felt the same way and just happened to have a little extra time to look into it.
Amazon and Alibaba are the largest marketplace in the world and all these examples are just very small. Without including their model and growth the analysis will be always incomplete.
Perseverance is one of the biggest asset in building a marketplace, besides the qualities or technical innovations and I do not see it even discussed.
Amazon solved Chicken and Egg problem by buying inventory itself and countless innovative and non innovative work, I feel what stands out in it is perseverance.
Alibaba solved the problem by buying themselves from vendors listed on their marketplace to give them an illusion that the marketplace works. Also they did countless innovative and non innovative work. Here also it’s perseverance which made what they are.
Perseverance is one of the biggest asset in building a marketplace, besides the qualities or technical innovations and I do not see it even discussed.
Amazon solved Chicken and Egg problem by buying inventory itself and countless innovative and non innovative work, I feel what stands out in it is perseverance.
Alibaba solved the problem by buying themselves from vendors listed on their marketplace to give them an illusion that the marketplace works. Also they did countless innovative and non innovative work. Here also it’s perseverance which made what they are.
Amazon did not start as a marketplace. It started to allow third party sellers in 2002, iirc.
I think that's the point. you could look at it like they seeded their supply and built the demand side first.
I don't think we can say that Amazon became the largest online retailer just to seed their supply.
It's funny because most of their profits come from PPC and AWS. The way I look at it their global retail and warehousing operation is Jeff Bezos Hobby.
Lots of good research but the Paul Graham post on Do Things that don’t scale was way more succinct and insightful
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This is a really interesting article, I've been looking for something like this as I'm teasing out a marketplace type side project at the moment and I couldn't find anything interesting.
Really useful insights as we're trying to kick off an API marketplace powered by OSS -- thanks!
More info please :)
I would pay to not have to wait to read parts 2 and 3.
> I’m frequently asked about what Airbnb did right
This is the problem. They didn't do it right. They broke TOSes. They committed fraud. They misled home owners and renters. They broke hospitality laws. They broke licensing and employment laws. They evaded taxes. They bait n switched customers. They enabled more fraud from their market place participants.
They didn't get big by doing things right.
This is the problem. They didn't do it right. They broke TOSes. They committed fraud. They misled home owners and renters. They broke hospitality laws. They broke licensing and employment laws. They evaded taxes. They bait n switched customers. They enabled more fraud from their market place participants.
They didn't get big by doing things right.
I’d argue that the definition of “right” is highly subjective.
If the goal is “get big and be profitable”: they are big and profitable. Ipso facto, they did it right.
Whether of not many of the things you mentioned are right are wrong is a matter of debate. For me, I wouldn’t consider the following “wrong”:
> They broke hospitality laws. > They broke licensing and employment laws.
Several of the other points are ambiguous to me because I’m not terribly familiar with Airbnb’s history.
More to the point... to some degree, skirting and even blatantly ignoring law and regulation is celebrated in our industry. We call it “disruption”. I’m all for that, but whether it’s right or wrong is - as I said before - a matter of perspective.
If the goal is “get big and be profitable”: they are big and profitable. Ipso facto, they did it right.
Whether of not many of the things you mentioned are right are wrong is a matter of debate. For me, I wouldn’t consider the following “wrong”:
> They broke hospitality laws. > They broke licensing and employment laws.
Several of the other points are ambiguous to me because I’m not terribly familiar with Airbnb’s history.
More to the point... to some degree, skirting and even blatantly ignoring law and regulation is celebrated in our industry. We call it “disruption”. I’m all for that, but whether it’s right or wrong is - as I said before - a matter of perspective.
Tl;dr: sell things in the marketplace and buy things from users who put up things to sell in the marketplace until users are organically selling and buying from each other, and make sure the whole platform doesn’t suck. That’s basically it.
this article says just about nothing
blerg
This is the largest anonymous and free marketplace for hacking : https://www.hackerslist.co/
While I respect the goal of what you're doing, your initial IP address terminates in Arizona. You could be opening yourself up to legal issues there (I am not a lawyer). Maybe operate and run it out of another country? Essentially, depending on how you're communicating with your hackers could be open to application log seizure etc to (attempt) to identify them or clients.
Selecting 'All Hackers' produces https://www.hackerslist.co/find-a-hacker/?rating=0 and does not show anyone :)
And I thought this was a place to hire people to hack together a prototype, not hack an instagram account.
There is no one else to read when it comes to market entry. He invented an entire industry. He moved from sector to sector with ease. At a very high level:
He started sports representation with golf; then moved into tennis; moved into other individual sports & high visibility figure representation (sumo anyone?); then team sports; expanded onto designing the event venues (golf courses, car races); added marketing and advertising at these events. And he was not done there. Now he had the players, the fields, so he expanded to training in sports academies, and all along the way he took pictures, and videos of the events and sport figures for resale. Most of historical sport video footage was his. I have not even scratched the service of what he has done with his perseverance and ability to pivot.
2003 sucked for me.