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.
Enjoyed this article so much. Alibaba still remains a monopoly in lead gen and they nail the problem of the discovery very well. Transaction is still a challenge but cross border commerce, language barrier and fragmented factories still exist which makes it sticky. So much opportunity for a company to build and create a strong discovery + transaction tool for factories. The challenge I foresee is how do create stickiness at scale.
Thank you for writing this, thoroughly enjoyed reading all of it. This essay reinforced a lot of learnings from my time as a PM at Urban Company in India - a managed marketplace for home services.
I very strongly resonated when you wrote 'winning at enforcement and distribution tends to be more defensible precisely because it is harder' and how a services marketplaces need to move beyond led gen to unlock their true monetisation potential.
I have seen this play out at Urban Company bc their moat has been their very efficient ops at scale. They don't have a single competitor at the same scale because they have cracked the full stack model in services AND at scale WHILE maintaining customer's experience & trust. Very hard to replicate without an obnoxious amount of capital.
I am very excited about reading your next essay right after! Cheers.
Wondering if you have heard of builder.ai? Would you consider its a next generation marketplace for services (building software in this case)?
Perhaps marketplace for services should aim at a niche space or have a very focus vertical where high margin can be made like building software or product design (ui/ux). From that, the marketplace would be able to evolve into a seller (e.g, hiring in-house expert who are engineers or product manager) and cater to the 4 costs that you mentioned.
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.
Enjoyed this article so much. Alibaba still remains a monopoly in lead gen and they nail the problem of the discovery very well. Transaction is still a challenge but cross border commerce, language barrier and fragmented factories still exist which makes it sticky. So much opportunity for a company to build and create a strong discovery + transaction tool for factories. The challenge I foresee is how do create stickiness at scale.
Thank you for writing this, thoroughly enjoyed reading all of it. This essay reinforced a lot of learnings from my time as a PM at Urban Company in India - a managed marketplace for home services.
I very strongly resonated when you wrote 'winning at enforcement and distribution tends to be more defensible precisely because it is harder' and how a services marketplaces need to move beyond led gen to unlock their true monetisation potential.
I have seen this play out at Urban Company bc their moat has been their very efficient ops at scale. They don't have a single competitor at the same scale because they have cracked the full stack model in services AND at scale WHILE maintaining customer's experience & trust. Very hard to replicate without an obnoxious amount of capital.
I am very excited about reading your next essay right after! Cheers.
Thanks for such a great piece Dan!
Wondering if you have heard of builder.ai? Would you consider its a next generation marketplace for services (building software in this case)?
Perhaps marketplace for services should aim at a niche space or have a very focus vertical where high margin can be made like building software or product design (ui/ux). From that, the marketplace would be able to evolve into a seller (e.g, hiring in-house expert who are engineers or product manager) and cater to the 4 costs that you mentioned.