Consumer Marketplace Fundamentals (Cornell Johnson School 2013)
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Transcript of Consumer Marketplace Fundamentals (Cornell Johnson School 2013)
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Fundamentals of consumer marketplace business models [ 11 factors to identify and execute successful consumer marketplaces ]
[email protected] www.rishidean.com
Current Topics in Marketing (11/26/2013)
FIX Creating a consumer
marketplace
Lessons learned from Sittercity
Rishi Dean www.sittercity.com
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Why me?
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The long, winding road
Started / Ground Floor
Advise / Volunteer
Currently
3 Rishi Dean – www.rishidean.com
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4 Rishi Dean – www.rishidean.com
That doesn’t make me an “expert”
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5 Rishi Dean – www.rishidean.com
…only a guide
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Why this topic?
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Your best bet to make $1 billion
~20 years of consumer internet
24 public companies >$1B x 2 for acquisitions
~2 multi-billion dollar companies / year
2/3 are “marketplace” businesses Source: James Slavet, Greylock
7 Rishi Dean – www.rishidean.com
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Why now?
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Our economy is fundamentally
shifting
9 Rishi Dean – www.rishidean.com
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P2P marketplaces can reduce “economic slackness” (unemployment)
10 Rishi Dean – www.rishidean.com
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Today…
Intro & academic underpinnings
Keys to building P2P marketplaces
Sittercity case
Presentations / Feedback / Epilogue
1
2
3
4
11 Rishi Dean – www.rishidean.com
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Marketplaces are the foundation of
the internet
12 Rishi Dean – www.rishidean.com
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13 Rishi Dean – www.rishidean.com
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The internet makes markets efficient
14 Rishi Dean – www.rishidean.com
Commerce eBay, Craigslist, Amazon Marketplace, …
Auto Uber, Lyft, RelayRides, …
Child Care Sittercity, Care, …
Dating Match.com, eHarmony, okCupid, …
Custom Goods CustomMade, Etsy, …
Examples
Errands TaskRabbit, Zaarly, Exec, …
Travel Airbnb, Expedia, Priceline, …
Skills oDesk, Skillshare, …
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15 Rishi Dean – www.rishidean.com
Not all marketplaces are created equal
Transaction initiator Buy-side? Sell-side? Combo?
Transacted item Product? Service? Commodity?
Market scope Horizontal? Vertical? Niche?
Revenue model Subscription? Transaction?
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Pipes vs. Platforms?*
Inspired by: @sanguit http://platformed.info/why-‐business-‐models-‐fail-‐pipes-‐vs-‐platforms/
16 Rishi Dean – www.rishidean.com
Dominant Offline “Create & push”
B2B / B2C
Dominant Online “Facilitate interactions”
P2P / B2B
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Since we’re at school, let’s look at the theory: Platform economics
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2-sided network incentives
18 Rishi Dean – www.rishidean.com
Demand Supply
1) Initial Adoption
1) Initial Adoption
2) Same-side
Effects
2) Same-side
Effects
3) Cross-Network Effects
o Why do buyers initially adopt?
Phase 1: Initial Adoption
o Why do sellers initially adopt?
o How do more buyers help one another?
Phase 2: Same-side Effects
o How do more sellers help one another?
o Increase in liquidity Phase 3:
Cross-side Effects o Increased liquidity
Strategies for Two-Sided Markets HBR ARTICLES | Thomas R. Eisenmann, Geoffrey Parker, Marshall W. Van Alstyne | Oct 1, 2006
Platform
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Consumer marketplaces are special cases of these platforms
Strategies for Two-‐Sided Markets HBR ARTICLES | Thomas R. Eisenmann, Geoffrey Parker, Marshall W. Van Alstyne | Oct 1, 2006
19 Rishi Dean – www.rishidean.com
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…almost every massively successful tech business is a platform, many of those are marketplaces
20 Rishi Dean – www.rishidean.com
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Keys to building online P2P
marketplaces
21 Rishi Dean – www.rishidean.com
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22 Rishi Dean – www.rishidean.com
1) Industry Selection Putting the odds in your favor
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23 Rishi Dean – www.rishidean.com
Characteristics of good industries
Big
Ripe
Plentiful
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24 Rishi Dean – www.rishidean.com
Addressable customers
Frequency of transaction
Transaction size
Potential amount transacted via the platform is large
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25 Rishi Dean – www.rishidean.com
Consolidate fragmented markets
Economic empowerment
Deliver new enhanced experiences
Markets primed for disruption
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26 Rishi Dean – www.rishidean.com
“Ownable” network effects
Groups who interact
More users = more value
Scale matters
Can own it
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2) Network Initialization Gaining traction
27 Rishi Dean – www.rishidean.com
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3 keys of gaining initial traction
28 Rishi Dean – www.rishidean.com
¡ Adoption
¡ Liquidity
¡ Pricing
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29 Rishi Dean – www.rishidean.com
10x value proposition
“Prime the pump”
Lock in scarce supply
Attract users and provide instant utility
Onboarding + Activation
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30 Rishi Dean – www.rishidean.com
Liquidity: users can find what they’re looking for
Substitutes
Price dispersion
Market segmentation
Pricing
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31 Rishi Dean – www.rishidean.com
Capture value commensurate with what you create
Sources of revenue
Side of subsidy
Payment scheme
Output costs
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3) Service Design Sustainability
32 Rishi Dean – www.rishidean.com
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3 levers of sustainability
33 Rishi Dean – www.rishidean.com
¡ Control
¡ Scale
¡ Competition
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34 Rishi Dean – www.rishidean.com
Control of the customer lifecycle
Intermediate the transaction
Avoid defection
Repeat behavior
Data cycle
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35 Rishi Dean – www.rishidean.com
Scaling up within and across segments
Markets & segments
New market setup
Low friction vs. leverage
Community-driven
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36 Rishi Dean – www.rishidean.com
Creating long-term advantage
Winner take all?
Share or fight for control?
Threat of envelopment
Switching costs
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Opportunities Ahead
37 Rishi Dean – www.rishidean.com
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38 Rishi Dean – www.rishidean.com
Mobile
Follow the customer
Location / Proximity
Immediacy
“Moment of truth”
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39 Rishi Dean – www.rishidean.com
High-consideration services
Trust first
Offline first
Reputation
Social graph
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Takeaway: “Ownable Network Effects”
¡ Backbone of the internet & the most lucrative consumer biz model
¡ 1) Select an attractive industry § Big market by expected total transaction volume
§ Ripe for technology-enabled consolidation § Plentiful to attain and own the network effect
¡ 2) Gain initial traction § Adoption: overcome “chicken & egg”
§ Liquidity: expectation you can find what you’re looking for § Pricing: capture value commensurate with what you create, but allow for growth
¡ 3) Protect & grow the platform § Control: ensure value across all touch-points of customer lifecycle § Scale: Cost-effective expansion into new markets / segments / verticals
§ Competition: Create a “moat” around the castle with high switching costs and lockout
¡ 4) Opportunities ahead § Mobile: Always on systems for ad-hoc marketplaces based on proximity & affinity § Social / Trust: Unlock high consideration P2P verticals
40 Rishi Dean – www.rishidean.com
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41 Rishi Dean – www.rishidean.com
Thanks to you Be safe, have fun!
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I’m here to help
42 Rishi Dean – www.rishidean.com
¡ Email: [email protected] ¡ Blog: rishidean.com ¡ Twitter: @rishidean
¡ Sittercity: sittercity.com ¡ Twitter: @sittercity
Sittercity:
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Fundamentals of consumer marketplace business models [ 11 factors to identify and execute successful consumer marketplaces ]
[email protected] www.rishidean.com
Current Topics in Marketing (11/26/2013)
FIX Creating a consumer
marketplace
Lessons learned from Sittercity
Rishi Dean www.sittercity.com