Marketplace Evolution

This thread on Twitter about the evolution of marketplaces is well worth a read to anyone working in that space.  Most of the low barrier, high-frequency markets have been built and marketplaces are now moving into managed services which are much more difficult.

There are still many areas where the purchase decision and actual completion of the purchase require extra work in the background.

The added complication here is that a lot of high-value marketplaces are in industries where the transactions are low frequency.  As a result, customer knowledge is low and the trust barrier to acquiring their business is high. Examples include home buying, car purchases, and in my experience energy choice.

Consequently, the largest return on $ spent in these industries is on providing the transaction layer while running lead gen on the services because the customer isn’t buying frequently enough (18+ months) to be brand loyal.

In these markets, until consumer confidence in online transaction grows or a dominant brand captures most of the share the costs to retain are too high to also offer services.

So, instead marketplaces focus on purchase & lead gen services b/c it’s the most immediate payback. If not VC backed, this creates great mailbox money for a founder.

All that to say the customer almost always has to be purchased in these markets and the services don’t buy a high frequency of repeat business. Even though their complexity/infrequency could use a high level of end to end service.

Kevin Stevens

Partner @ Intelis Capital investing in the digitization of traditional industries. Previously product lead at KPCB-backed Choose Energy.
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