On your 2x2 (depth vs breadth, deep/shallow), do you think people would be satisfied with <10 good options for a given search on Airbnb but not on Amazon? - For me, it depends on how specific their search is (i.e. if you're looking for a very specific item on Amazon, you're probably happy with <10 items, but if you're looking for a broad search term, you wouldn't, I think the same applies for Airbnb...)
Probably the best way to think about the depth dynamic is a curve with value to the customer on the y axis and amount of supply on the x axis. In total that curve asymptotes faster for Airbnb than it does for Amazon, indicating that there are more *possible* search parameters and thus need for even higher amount of supply.
You're probably right that talking about it in terms of options per search is not totally right.
My bet is either mega fleet or replaced by someone else running a mega fleet. Waymo is proving right now that it is feasible to rapidly aggregate demand
Such thoughtful insights! I’m curious: What features are most effective in encouraging suppliers to rely on a single platform, especially given their natural tendency to diversify sales channels?
Thank you! I think the motivation of almost any supplier in a marketplace is to grow their business, so they are never going to single-tenant by choice. But generally if you can automate / abstract some part of their job they hate, it will get adoption - inventory, accounting, point of sale, logistics, etc.
I think in practice the other thing that happens is some marketplaces just become so much better for customers that they aggregate all of the demand, and once you are such a high share of potential new customers it encourages single-tenanting because the investment in other marketplaces becomes less worthwhile
Great read as always :)
On your 2x2 (depth vs breadth, deep/shallow), do you think people would be satisfied with <10 good options for a given search on Airbnb but not on Amazon? - For me, it depends on how specific their search is (i.e. if you're looking for a very specific item on Amazon, you're probably happy with <10 items, but if you're looking for a broad search term, you wouldn't, I think the same applies for Airbnb...)
Probably the best way to think about the depth dynamic is a curve with value to the customer on the y axis and amount of supply on the x axis. In total that curve asymptotes faster for Airbnb than it does for Amazon, indicating that there are more *possible* search parameters and thus need for even higher amount of supply.
You're probably right that talking about it in terms of options per search is not totally right.
Curious on your comment on about the future of Uber as a marketplace and self driving cars,
The biggest question will be, will Uber just become a marketplace to aggregate self driving car fleets? or will it just run it's own mega fleet?
My bet is either mega fleet or replaced by someone else running a mega fleet. Waymo is proving right now that it is feasible to rapidly aggregate demand
Thanks Dan for keeping it up! Great mental models and analysis.
Glad it is useful!
Thanks Dan for the great read. You've got a knack for distilling these complex marketplace concepts into a workable framework. Kudos!
Appreciate that Mark! Glad you found it useful.
Thank you for this insightful analysis. On the theme of network effects, you may be interested in reading my last piece: The Co-Opetition Dilemma: Will Airbnb’s Co-Host Network Benefit Everyone? See https://paulbelleflamme.substack.com/p/the-co-opetition-dilemma-will-airbnbs
Thank you for reading!
Such thoughtful insights! I’m curious: What features are most effective in encouraging suppliers to rely on a single platform, especially given their natural tendency to diversify sales channels?
Thank you! I think the motivation of almost any supplier in a marketplace is to grow their business, so they are never going to single-tenant by choice. But generally if you can automate / abstract some part of their job they hate, it will get adoption - inventory, accounting, point of sale, logistics, etc.
I think in practice the other thing that happens is some marketplaces just become so much better for customers that they aggregate all of the demand, and once you are such a high share of potential new customers it encourages single-tenanting because the investment in other marketplaces becomes less worthwhile