## Your P2K Articles-7 ### Your P2K Articles ![rw-book-cover](https://readwise-assets.s3.amazonaws.com/static/images/default-book-icon-9.63dbe834380e.png) #### Metadata * Author: [[P2K]] * Full Title: Your P2K Articles * Category: #books #### Highlights * In the beginning, we had the listing era. Companies like Craigslist, Grubhub, and Yelp dominated the marketplace ecosystem essentially providing lead gen for other businesses and their end customers. (Location 39) * Then we saw the proliferation of transactional marketplaces like Thumbtack and Fiverr which facilitated transactions between individuals — it connected some vertically specialized individual with an end customer who could benefit from their service. (Location 41) * While horizontal marketplaces, like Amazon, target a broad range of customers (books, prescriptions, grocery and cars), vertical marketplaces pick a subset of the market (a specific vertical) to target while building an end-to-end experience that prior incumbents (often non-tech-based) could never replicate. For example, while you could buy event tickets on Craigslist or eBay, Stubhub is integrated with ticket providers so they could also verify your identity, show seating charts, and the like — the experience is clearly better and you're not left empty-handed at the stadium gates. (Location 49) * We'll probably have a couple super-apps that dominate the rest — the 1-2 apps we'll go to for food, transportation, delegating tasks, and more. So vertical marketplaces either likely have to expand and become horizontal, or get acquired. You're seeing this cut-throat race today with UberEats, DoorDash, PostMates and GrubHub vying to become your super-app. (Location 57) * Once you've picked a market and identified both your demand and supply sides, the first step in building a successful marketplace is to identify the "red hot center" — the group that feels the pain most acutely — because they'll jump through hoops to use the product initially. Once you've found that group, no matter how good your product is, you'll have to find a solution to the chicken/egg problem; who's going to use your product first when there's no value without the other side of the equation? (Location 60) * According to Kevin Kwok, one way to think about easing supplier acquisition is by leveraging an underutilized fixed asset. "The best way to think of underutilized fixed assets," he says, "is as pure potential energy sitting in people's homes, cars, and random tchotkes." As we see today, Hipcamp leverages underutilized land, and Cloudkitchens leverages underutilized commercial kitchens; Airbnb uses homes, and Uber uses cars. With that potential energy, the asset can help early markets emerge for marketplaces. The other great thing about underutilized fixed assets is that once you find them you've unlocked a latent supply that can act as a money printing machine. Since the asset is otherwise idle, if you can get the owner of that asset onto your platform (and repeat that process over and over again), you may be on your way to building a massive business. So just like any other startup, locking in supply is about having a key value prop that the supply side cannot overlook. To put it another way, paraphrasing Sarah Tavel, think about how you can make both sides of the marketplace happy — what does the supply side need that can be satiated by the demand side, and vice versa, and how does that make each customer happy as a result. "Building a marketplace," Sarah says, "is a relentless pursuit of exceeding expectations to create happiness." In the beginning, especially to get your initial users, you'll have to do a ton of things that don't scale. Obviously you'll have to be scrappy. Knock on doors, have 1:1 conversations, and onboard each individual user — do the things that will increase happiness, not just GMV. Sarah says it best: "by pursuing happiness, you'll achieve growth. But not vice-versa." "Much like MAUs is a vanity metric for consumer social companies, I believe GMV is a vanity metric for marketplaces … GMV does not get to the heart of whether you are creating enduring value or not. No matter how large an incumbent may be, they are always vulnerable to a new entrant that makes buyers and sellers happier. In other words, happiness — not scale — is your moat … If you think of growth as a means to increasing the average level of happiness per transaction (instead of the goal itself), it will focus you on quality growth over vanity growth." Happiness as your north star will help you create magic for your customers. It's not the beautiful product UI that's keeping people coming back, it's the happiness (compared to that of your competitors) your well-crafted marketplace experience brought them. Sander Daniels (founder of Thumbtack), advises to find the one thing that works (no matter what it is) on both the demand side and supply side, and then double down. For Thumbtack, email marketing to professionals and SEO for customers were the tactics that worked — he reported something like 98% of their early growth came from those single channels, so they went all in. He didn't even consider competitors. Sander mentioned that if you're going after a big market, it's clear from the outset that there will be more 2-3+ winners in a space, depending on the market size. Also, if you're devoted to building a marketplace, you're signing up to play a really long game — it's impossible to know who will be winning 5-10 yrs from now based on current metrics. So to find a supply-side that fits the mold we're looking for, seek out markets that have fragmented supply, but are also polygamous. Babysitting, for example, would not be a good sector because people in that market generally have monogamous relationships — families often have one babysitter, and their switching cost is incredibly high. (Location 66) * Why? Ideally, you want to recoup fully loaded CAC (on a net contribution margin basis) in the first 6 months of the business and grow your LTV to be at least 3x CAC in 18 months. Since measuring LTV in the early days is especially hard, honing in on the side that needs your marketplace most will be increasingly critical as you scale. (Location 103) * The best way to understand common pitfalls is to look at case studies. Why do most "Uber for X" companies fail, for example? Well, for one, Uber has a 10x better experience, but it's also cheaper. (Location 121) * Or why didn't Homejoy work? Similarly, as a result of low purchase frequency, and low AOV per customer, users ended up going off-platform to develop monogamous relationships with cleaners. It was clear that once you found one you liked, you'd probably want to stick with them, resulting in Homejoy's downfall. This doesn't happen with Uber because you won't keep calling the same driver and blindly hope they're only 2-3 minutes away. Connecting you reliably to a nearby driver was the value-prop, not just the driver themselves. (Location 124) * However, with B2B marketplaces we can make it easier to create these new relationships among B2B companies and their customers. What changed? First off, there's the generational shift — millennials have higher expectations and want better products. Second, with the proliferation of APIs from companies like Stripe & Plaid, marketplaces can easily integrate lending & payments. Further, this API-driven architecture enables B2B marketplaces to build real-time multi-vendor product catalogs with accurate SKU and pricing information. (Location 187) # Your P2K Articles ![rw-book-cover](https://readwise-assets.s3.amazonaws.com/static/images/default-book-icon-9.63dbe834380e.png) ## Metadata - Author: [[P2K]] - Full Title: Your P2K Articles - Category: #books ## Highlights - In the beginning, we had the listing era. Companies like Craigslist, Grubhub, and Yelp dominated the marketplace ecosystem essentially providing lead gen for other businesses and their end customers. (Location 39) - Then we saw the proliferation of transactional marketplaces like Thumbtack and Fiverr which facilitated transactions between individuals — it connected some vertically specialized individual with an end customer who could benefit from their service. (Location 41) - While horizontal marketplaces, like Amazon, target a broad range of customers (books, prescriptions, grocery and cars), vertical marketplaces pick a subset of the market (a specific vertical) to target while building an end-to-end experience that prior incumbents (often non-tech-based) could never replicate. For example, while you could buy event tickets on Craigslist or eBay, Stubhub is integrated with ticket providers so they could also verify your identity, show seating charts, and the like — the experience is clearly better and you’re not left empty-handed at the stadium gates. (Location 49) - We’ll probably have a couple super-apps that dominate the rest — the 1-2 apps we'll go to for food, transportation, delegating tasks, and more. So vertical marketplaces either likely have to expand and become horizontal, or get acquired. You’re seeing this cut-throat race today with UberEats, DoorDash, PostMates and GrubHub vying to become your super-app. (Location 57) - Once you’ve picked a market and identified both your demand and supply sides, the first step in building a successful marketplace is to identify the "red hot center" — the group that feels the pain most acutely — because they'll jump through hoops to use the product initially. Once you’ve found that group, no matter how good your product is, you’ll have to find a solution to the chicken/egg problem; who’s going to use your product first when there’s no value without the other side of the equation? (Location 60) - According to Kevin Kwok, one way to think about easing supplier acquisition is by leveraging an underutilized fixed asset. “The best way to think of underutilized fixed assets,” he says, “is as pure potential energy sitting in people’s homes, cars, and random tchotkes.” As we see today, Hipcamp leverages underutilized land, and Cloudkitchens leverages underutilized commercial kitchens; Airbnb uses homes, and Uber uses cars. With that potential energy, the asset can help early markets emerge for marketplaces. The other great thing about underutilized fixed assets is that once you find them you’ve unlocked a latent supply that can act as a money printing machine. Since the asset is otherwise idle, if you can get the owner of that asset onto your platform (and repeat that process over and over again), you may be on your way to building a massive business. So just like any other startup, locking in supply is about having a key value prop that the supply side cannot overlook. To put it another way, paraphrasing Sarah Tavel, think about how you can make both sides of the marketplace happy — what does the supply side need that can be satiated by the demand side, and vice versa, and how does that make each customer happy as a result. “Building a marketplace,” Sarah says, “is a relentless pursuit of exceeding expectations to create happiness.” In the beginning, especially to get your initial users, you’ll have to do a ton of things that don’t scale. Obviously you’ll have to be scrappy. Knock on doors, have 1:1 conversations, and onboard each individual user — do the things that will increase happiness, not just GMV. Sarah says it best: “by pursuing happiness, you’ll achieve growth. But not vice-versa.” “Much like MAUs is a vanity metric for consumer social companies, I believe GMV is a vanity metric for marketplaces … GMV does not get to the heart of whether you are creating enduring value or not. No matter how large an incumbent may be, they are always vulnerable to a new entrant that makes buyers and sellers happier. In other words, happiness — not scale — is your moat … If you think of growth as a means to increasing the average level of happiness per transaction (instead of the goal itself), it will focus you on quality growth over vanity growth.” Happiness as your north star will help you create magic for your customers. It’s not the beautiful product UI that’s keeping people coming back, it’s the happiness (compared to that of your competitors) your well-crafted marketplace experience brought them. Sander Daniels (founder of Thumbtack), advises to find the one thing that works (no matter what it is) on both the demand side and supply side, and then double down. For Thumbtack, email marketing to professionals and SEO for customers were the tactics that worked — he reported something like 98% of their early growth came from those single channels, so they went all in. He didn’t even consider competitors. Sander mentioned that if you’re going after a big market, it’s clear from the outset that there will be more 2-3+ winners in a space, depending on the market size. Also, if you’re devoted to building a marketplace, you’re signing up to play a really long game — it’s impossible to know who will be winning 5-10 yrs from now based on current metrics. So to find a supply-side that fits the mold we’re looking for, seek out markets that have fragmented supply, but are also polygamous. Babysitting, for example, would not be a good sector because people in that market generally have monogamous relationships — families often have one babysitter, and their switching cost is incredibly high. (Location 66) - Why? Ideally, you want to recoup fully loaded CAC (on a net contribution margin basis) in the first 6 months of the business and grow your LTV to be at least 3x CAC in 18 months. Since measuring LTV in the early days is especially hard, honing in on the side that needs your marketplace most will be increasingly critical as you scale. (Location 103) - The best way to understand common pitfalls is to look at case studies. Why do most "Uber for X" companies fail, for example? Well, for one, Uber has a 10x better experience, but it's also cheaper. (Location 121) - Or why didn't Homejoy work? Similarly, as a result of low purchase frequency, and low AOV per customer, users ended up going off-platform to develop monogamous relationships with cleaners. It was clear that once you found one you liked, you'd probably want to stick with them, resulting in Homejoy's downfall. This doesn’t happen with Uber because you won’t keep calling the same driver and blindly hope they’re only 2-3 minutes away. Connecting you reliably to a nearby driver was the value-prop, not just the driver themselves. (Location 124) - However, with B2B marketplaces we can make it easier to create these new relationships among B2B companies and their customers. What changed? First off, there's the generational shift — millennials have higher expectations and want better products. Second, with the proliferation of APIs from companies like Stripe & Plaid, marketplaces can easily integrate lending & payments. Further, this API-driven architecture enables B2B marketplaces to build real-time multi-vendor product catalogs with accurate SKU and pricing information. (Location 187)