This summary of the video was created by an AI. It might contain some inaccuracies.
00:00:00 – 00:24:51
The video primarily discusses strategies and insights for creating and sustaining successful marketplaces, drawing from the extensive experience of Josh, a General Partner at Jackson Square Ventures. Josh underlines the necessity of enhancing productivity, reducing inefficiencies, and leveraging existing large, fragmented markets. He also emphasizes high fragmentation and the presence in the payment flow as critical factors for marketplace success. Key considerations include:
1. **Monetization and Efficiency**: Despite the challenges of regular scheduling and low-frequency services, standardization, network effects, and easing customer effort, as seen with companies like Uber and OfferUp, are crucial for maintaining quality and efficiency in transactions.
2. **Horizontal vs. Vertical Marketplaces**: Grouping infrequent goods and services on a single platform enhances user experience and usage frequency. Double commit and single commit models also determine marketplace efficiency.
3. **User Management and Disintermediation**: Onboarding should be easy for high-quality users and involve more tests for others. Tier systems and fostering community forums help retain users. Disintermediation remains a challenge as users may outgrow the marketplace’s value, requiring continuous value proposition enhancement.
4. **Pricing and Long-Term Engagement**: Adjusting pricing structures over time can help with retention. Implementing virtuous cycles through user attraction, screening, optimization, retention, and expulsion is vital, alongside effective and innovative feedback systems.
5. **Focus and Fraud Management**: Specific targeting, hands-on matchmaking, and balancing growth with fraud prevention are necessary. Differentiating between master and commodity marketplaces, as well as maintaining transparency in user progression, ensures trust and consistency.
The video concludes by emphasizing the importance of trust, transparency, and strategic focus in building and sustaining marketplaces, with examples like Uber, Upwork, and OfferUp illustrating successful application of these principles.
00:00:00
In this part of the video, Josh, a GP at Jackson Square Ventures, introduces himself and provides background information on his experience with marketplaces over the past 14 years. He highlights his involvement with notable companies like oDesk (now Upwork) and Reve, and discusses a range of marketplace investments his firm has made, including OfferUp, Aalto, Prexy, Rented, and Contently.
Josh then outlines his insights and frameworks for creating successful marketplaces. He emphasizes that the most crucial element of an effective marketplace is providing massive productivity gains by eliminating inefficiencies, which in turn lowers costs for buyers and allows suppliers to earn more, attracting both sides to the platform. He prefers entering existing, inefficient large markets over creating new ones and states that high fragmentation and being in the payment flow are vital for marketplace success. Josh also mentions the importance of usage frequency and highlights a unique aspect he calls “irregular non-monogamous usage,” illustrated with an example of home cleaners or maids.
00:03:00
In this part of the video, the speaker discusses the challenges and dynamics of monetizing marketplaces, particularly when services are regularly scheduled with the same person. They emphasize the value of marketplaces in matching demand and supply, which is hindered when regular scheduling reduces the need for dynamic matching. They also highlight the importance of standardization for maintaining quality in transactions and explore network effects and market expansion by easing customer effort, citing examples like Uber and OfferUp. The segment further delves into the debate between horizontal and vertical marketplaces, noting the significance of purchase frequency and transaction size. Vertical marketplaces may be flawed if they try to copy horizontal marketplace models like Uber for diverse, low-frequency services. The speaker uses examples to illustrate how different services require distinct marketplace structures based on these factors.
00:06:00
In this part of the video, the speaker emphasizes the importance of grouping services or goods into a horizontal platform to avoid users having numerous apps for infrequent use, which improves user experience and drives up usage frequency. They highlight platforms like Upwork that offer diverse freelance services remotely. The speaker also identifies a significant opportunity in relatively empty top-rate sections, forecasting the rise of B2B procurement platforms in various industries, like oil, gas, and pharma.
The discussion then shifts to different match types in platforms: double commit, where both parties must commit (slower but sometimes necessary), and single commit models like Uber’s, where either the buyer or supplier commits, significantly increasing efficiency and fill ratio.
The speaker shares a past mistake, describing the “desperation curve” in marketplace design, where overly demanding initial requirements deter high-quality providers, who typically do not go through extensive application processes but get recruited directly.
00:09:00
In this part of the video, the speaker emphasizes the importance of user onboarding for marketplaces, suggesting that high-quality users should have an easy onboarding process while low-quality users may benefit from more tests and certifications. Effective marketplaces teach users about the platform through community guidelines and past transaction insights. A key strategy mentioned is pairing new buyers with experienced suppliers to improve transaction success rates. The speaker also advocates for community forums to foster marketplace culture and provide product feedback. The discussion then shifts to network effects, noting that while initial market penetration improves the platform, there’s a limit to benefits without innovation. The example of Uber is used to illustrate the necessity of introducing new services like UberX and UberPool to sustain growth and reduce costs.
00:12:00
In this segment of the video, the speaker discusses the importance of maintaining quality and managing costs in a marketplace. They highlight that having a large number of designers isn’t crucial; around 100 is generally sufficient. They share insights from their experience at Rev, emphasizing the significance of tiering users. Initially, users start at a base level, but through consistent high-quality work and timely deliveries, they can move up to higher tiers, such as Revver Plus. This tier system provides premium access to jobs for top performers, keeping them motivated and productive.
The discussion then shifts to the challenge of disintermediation, where users outgrow the marketplace’s value. The perceived value often decreases over time, especially as the initial matching value diminishes and subsequent management and payment tools offer less incremental value. To counter this, marketplaces need to either increase their value proposition or reduce prices to retain users.
00:15:00
In this segment of the video, the speaker discusses strategies for pricing in long-term engagements, suggesting that starting at a higher percentage and reducing it over time can increase retention. They emphasize the importance of enhancing productivity to retain platform users and justify higher rates. They highlight the value of building virtuous cycles in a marketplace, focusing on attracting, screening, optimizing, retaining, and expelling users. The speaker notes that while people tend to overemphasize screening, optimizing, retaining top performers, and removing poor performers are more effective. They also discuss the limitations of conventional feedback systems and suggest alternative measures for quality assessment, such as anonymous feedback. Lastly, the speaker touches on liquidity hacking and engages the audience with a quiz about the evolutionary origins of the chicken and the egg to illustrate the concept.
00:18:00
In this part of the video, the speaker discusses various strategies for building and sustaining successful marketplaces. They highlight the importance of focus, such as targeting specific zip codes and demographics, which contributed to the success of OfferUp. They also mention the hands-on approach used in the early stages of oDesk, where they acted like recruiters to make matches happen in real time. The speaker addresses the inevitable issue of fraud in marketplaces, emphasizing the need for a delicate balance between growth and security. Finally, they touch on the emerging trend of “master marketplaces” that offer cost savings and convenience, moving beyond traditional commodity marketplaces.
00:21:00
In this part of the video, the speaker discusses master and commodity marketplaces, noting that people in master marketplaces prioritize access, prestige, and reputation over cost savings, whereas in commodity marketplaces, suppliers value earnings, convenience, and quick payments. The speaker argues that combining these two types of marketplaces is ineffective as they are fundamentally incompatible. Additionally, the speaker reflects on observations from years of experience and touches upon the nature of B2B horizontal marketplaces, using the example of Arriba and the oil and gas sector to illustrate industry-specific, cross-supplier platforms. The importance of trust and challenges related to disintermediation in marketplaces are also highlighted.
00:24:00
In this part of the video, the speaker discusses the importance of transparency in the process of moving between tiers based on specific criteria such as quality, turnaround time, and total earnings. They emphasize that if the criteria are clearly stated and objective from the beginning, and remain consistent, users are likely to respect the system even if it involves lower fees.