Understanding transaction costs will help you understand where marketplaces will succeed, what kind of marketplace to build, and how to price them.
Looking forward to reading your next essay on what's next for services marketplaces! I imagine the reason why most services marketplaces are stuck at the Lead Gen phase is that a lot of spend is on recurring services where once you get someone good, you don't need to pay the marketplace take rate. That's why most services marketplaces monetize through consumer subscriptions, and have to deal with high churn.
Really enjoyed reading this essay. Brought back lot of learnings from B-school.
As for Zillow, they have realized that lead generation is not going to cut it (they have been doing it over a decade now) and hence have developed a strategy of converting those leads into transactions through mortgage, financing, closing etc. They are looking to get into Managed Marketplace territory. It's true that their TAM at the moment is expanding; but I see lot of opportunities either through M&A activities or organically growing business into service industries for example building out Thumbtack-like business for home repair & services.