A nice essay about the evolution of marketplaces by Li Jin and Andrew Chen, both investors @ A16Z. The first thing they say that the next trillion-dollar opportunity lies in services vs. goods. Why? In the past twenty years, we’ve transformed the way people buy goods online, and in the process created Amazon, eBay, JD.com, Alibaba, and other e-commerce giants, accounting for trillions of dollars in market capitalization. The next era will do the same to the $9.7 trillion U.S. consumer service economy, through discontinuous innovations in AI and automation, new marketplace paradigms, and overcoming regulatory capture. The service economy lags: while services make up 69% of national consumer spending, the Bureau of Economic Analysis estimated that just 7% of services were primarily digital, meaning they utilized the internet to conduct transactions. There is a clear trend that software is eating the service economy, but it’s been slow, and they unpack the reasons for that in the article. They also cover how marketplaces were evolving over the last decades, essentially in 4 eras: 1. The Listings Era (1990s). These marketplaces were the digital version of the Yellow Pages, enabling visibility into which service providers existed, but placing the onus on the user to assess providers, contact them, arrange times to meet, and transact. 2. The Unbundled Craigslist Era (2000s). Companies iterated on the horizontal marketplace model by focusing on a specific sub-vertical, enabling them to offer features tailored to a specific industry. 3. The ‘Uber for X’ Era (2009-2015). In the early 2010s, a wave of on-demand marketplaces for simple services arose, including transportation, food delivery, and valet parking. These marketplaces were enabled by widespread mobile adoption, making it possible to book a service or accept a job with the tap of a button. 4. The Managed Marketplace Era (Mid-2010s). Managed marketplaces take on additional work of actually influencing or managing the service experience, and in doing so, create a step-function improvement in the customer experience. Rather than just enabling customers to discover and build trust with the end provider, these marketplaces take on the work of actually creating trust. The big question is, what’s next? My answer is Qoorio. Watch the interview here: https://www.youtube.com/watch?v=zl14Ty5-0Ko Read the article here: https://a16z.com/2018/11/27/services-marketplaces-service-economy-evolution-whats-next/
What’s Next for Marketplace Startups? - Andreessen Horowitz

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How to get first active users to your empty platform? “In any marketplace, you inherently have two sides to solve. Two-sided businesses typically have a producer side and a consumer side. For this to work, both producers and consumers need to be on the platform. Platforms are initially ghost towns. Users (demand-side) see no value unless they see content from the producers (supply-side). Producers don’t contribute unless they see users consuming their content. Because of this, a ghost town continues to remain a ghost town. Since consumers are a carrot for the producers and vice versa, this problem is typically solved by providing an alternate bait to one of the sides. Once one side is seeded, it acts as a bait for the other side to come on board. Having faced this challenge while building their own startup, the aurhor did some digging on how to solve the content creation problem in the initial days, from apps that all of us admire (and secretly envy). Don’t give up because the beginnings are always the hardest. Here are some successful growth hacks of 17 of the world’s largest consumer apps, specifically content marketplaces.” Read more: https://medium.com/better-marketing/how-did-fast-growing-platforms-get-their-users-7412084d5aec Thanks to: Yannick Oswald
How Did Fast-Growing Platforms Get Their Users? | by Mayur Mundada | Better Marketing | Jun, 2020 | Medium

Tomas MaksimaviciusStartups
Also here you can find a lot of useful hacks: https://www.dothingsthatdontscale.com/
The Network Effects Bible Another great Wednesday night material I recommend to read to anyone who is creating a marketplace or a network type business. Below are my key take aways from the read. “Network effects have been responsible for 70% of all the value created in technology since 1994 . Founders who deeply understand how they work will be better positioned to build category-defining companies. 1. Why Network Effects Are Important Network effects are mechanisms in a product and business where every new user makes the product/service/experience more valuable to every other user. 2. How Networks Work The critical mass of a network refers to the point at which the value produced by the network exceeds the value of the product itself and of competing products. This can happen at different times depending on the type of a network. Most products with network effects must ultimately reach critical mass in order to fully take advantage of the defensibility provided by their network effects. Before the size of the network reaches critical mass, the product remains quite vulnerable and may not have much value to users. For such products, the challenge is often to build enough initial value to incentivize early adopters to start using the product even before the network effects value has kicked in. 3. Properties of Networks Many network effect businesses require users to create a profile that’s visible to other nodes in the network. Networks with profiles tied to a node’s real identity, like your real personal name or real company name, are typically more effective at building network effects than networks with pseudonymous profiles (e.g. user-generated handles like “Tiger123”). 4. Building and Maintaining Network Effects We don’t suggest building single-player-only businesses. They tend to grow linearly and get dragged down by competition. 5. Related Concepts” Read the full article on NFX blog: https://www.nfx.com/post/network-effects-bible/
The Network Effects Bible
Your Life is Driven by Network Effects A great article I read this morning by James Currier, a Managing Partner at NFX, a seed-stage venture firm headquartered in San Francisco. Recommend to read it to actually anyone. “What city you live in. Who you date or marry. Which job you choose. What clothes you wear. We all think we make these choices ourselves. It certainly /feels/ like we’re in full control. But it turns out that our choices — both in our startups and in our lives — are more constrained than we think. The unseen hand in them all is the networks that surround us and the powerful math they exert on us. Working with network effects in our 100+ companies makes it impossible not to notice how the same mechanisms and math that create near-destiny for companies also create near-destiny for us as individuals. It’s mind-blowing once you see it. These constraints are highly determinative of how your life will turn out, guiding us inexorably down one path or another in ways that are both quite predictable. Yet these forces are typically unnoticed. This article outlines how we see network effects impacting nearly every aspect of your life. With that lens, it lays out a perspective on how to make the 7 most important decisions of your life. It will hopefully help you make decisions that are more true to the kind of life you want to lead. * Network Force: The Unseen Hand * Seeing the Math at Work in Your Life * Zipf’s Law and You * Your Body and Cities Have Predictable Mathematical Patterns * How do nodes on a human network work? * In Networks, The Rich Nodes Get Richer * The math behind why dinner parties behave the way they do * How Networks Form * What Does Your Network Want from You? * Your Life’s Crossroads * The Network Topology of Your Life * Crossroads of Your Life.” Link is here: https://www.nfx.com/post/your-life-network-effects/
Your Life is Driven by Network Effects

Antanas BernatonisHead of Business Development @Montonio |Fintech|POS|B2BSales|BD
Amazing! Justas Janauskas, can you share where to find such articles? Which people/pages do you follow and get the most useful morning readings like this from?
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The Death of Couchsurfing? Couchsurfing is a community of people hosting other community members for free in their spare space at home. It’s a pre-Airbnb era service, excellent for travelers on a budget. A decade ago, I was an active community member of Couchsurfing and had great memories of traveling and hosting other people on my couch. In fact, in 2008, I hosted two community members from Germany on my couch in Vilnius. At that time, I was building Vinted in Lithuania (known as manorabuziai.lt). My guests were so excited about the Vinted concept, so we decided to replicate it in Germany. It worked, became much popular than in Lithuania, got the attention of international investors, and enjoyed the ride of rapid growth until the end of 2014. What happened then? Well, we unilaterally introduced a mandatory transaction fee for every sale community members made on Vinted. Looking backward, that was a terrible decision that angered our community. People started to leave for other free platforms, like eBay Kleinanzeigen, avoid the fee, etc. Overnight from a growing business, we became a shrinking one. It took us 18 months to figure out a different monetization model without a required fee on every sale, which saved the company from going bankrupt. So what is happening today with CouchSurfing reminds me very much of my experience. They say they cannot cover all their operating expenses from community donations, and COVID-19 makes the situation much worse. They have done everything to reduce their operational costs, however, it is still not enough. They decided to introduce a mandatory $14.29/year membership fee to keep Couchsurfing alive. And the community is quite angered about that. It also means those who use the site only for hosting, in other words, offer their homes to others for free, have to pay the fee too. Which is hard to justify. Is this decision the end of Couchsurfing? If they will not come up with a way to generate enough revenue while keeping core functionality for free, then I would say yes. Time will soon show what will happen. Read the letter from Couchsurfing here: https://blog.couchsurfing.com/couchsurfing-needs-your-help/
Couchsurfing needs your help

Lina LinkeviciuteTheatre Director [email protected] Paintings/Luxury Business Professional
Oh My God!!!! 10 years ago the whole couchsurfing community in Bordeaux helped me to do my first steps in France, during the first 7 weeks I have changed 7 places where each host shared with me their network, knowledge, support, assistance, advices, friendship till now!!! It was incredible experience!!! Couchsurfing should survive!!!!
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A few months ago, a16z published ‘The a16z Marketplace 100’, a ranking of the largest and fastest-growing consumer-facing marketplace startups and private companies. Here are the key takeaways from the Marketplace 100, which they unpack in the article: 1. A handful of companies dominate. Four marketplaces account for 76% of observed GMV, while there are other 96 marketplaces in the list. 2. Travel, food, and groceries are the largest categories, by a lot. 3. Several emerging categories are intriguing, including local indie brands, celebrity shout-outs, streetwear, fitness memberships, and even car washes. 4. The fastest-growing marketplaces are growing really fast—3x to 5x year-over-year Also, I was happy to see that Lithuanian Vinted is in the 94th position, though, I would have expected it to rank much higher. Read the full article here: https://a16z.com/2020/02/18/marketplace-100/
The a16z Marketplace 100 - Andreessen Horowitz
A famous Airbnb growth study. Many things happened behind the scenes. An extreme mental strength is required from any founder, so if you are a founder, I suggest reading the story for inspiration.
Airbnb: The Growth Story You Didn't Know
How the biggest consumer apps got their first 1,000 users Another great essay from Lenny Rachitsky, ex Growth PM @ Airbnb, who collected first-hand accounts of how essentially every major consumer app acquired their earliest users, including lessons from Tinder, Uber, Superhuman, TikTok, Product Hunt, Netflix, and many more. His biggest takeaways from this research: 1. Just seven strategies account for every consumer apps’ early growth. 2. Most startups found their early users from just a single strategy. 3. The most popular strategies involve going to your user directly — online, offline, and through friends. Doing things that don’t scale. 4. To execute on any of these strategies, it’s important to first narrowly define your target user. 5. The tactics that you use to get your first 1,000 users are very different from your next 10,000. Read more in the link below.
How the biggest consumer apps got their first 1,000 users - Issue 25
How to kickstart a marketplace business? A nice piece written by Lenny Rachitsky, ex Growth PM @ Airbnb. He is sharing insights from 17 of today’s biggest marketplaces, including Airbnb, DoorDash, Thumbtack, Etsy, Uber and many more. Sharing some of his learnings: 1. Constraint. With the exception of one company, every single marketplace that he interviewed constrained their initial marketplace to more quickly get to critical mass. To some this may seem counter-intuitive — why limit your growth and opportunities when you are starting out? It turns out that the best way to get big is by first going small. 2. Supply. The vast majority of successful marketplaces focused almost all of their resources on growing supply early-on (80% of the companies I interviewed, 14 out of 17). 3. Direct sales (supply). One-on-one direct sales ended up being a crucial lever for about 60% of the companies, twice as common as the next biggest lever (piggy-backing and referrals). 4. Word of mouth (demand). Word-of-mouth was the most important growth channel for over half of the companies. Though this isn’t actually a growth “lever”, it was an enormous growth driver for these companies, and was a strong early signal of product/market fit.
How to Kickstart and Scale a Marketplace Business – Phase 1: Crack the Chicken-and-Egg Problem 🐣
Back in 2015 VersionOne VC prepared ‘A Guide to Marketplaces’. They updated it in 2018 and I find it relevant today and recommend to read for any marketplace founder.
Online Marketplaces: types, business models, network effects
Recently I watched the documentary I recommend watching to all current or new c2c marketplace founders. It is called 'The Third Industrial Revolution.' Well, the word 'revolution' sounds like something far away from our current lives, however, the author Jeremy Rifkin in simple language explains what triggered industrial revolutions in the past, and how the recent technological advancements are pushing us to a new, unprecedented, revolution. In essence, Rifkin says that two main factors trigger a massive change in all industries: (i) the new source of energy and (ii) the new communication technologies. Revolution is triggered once (i) and (ii) merge. The (i) discovery of coal and (ii) invention of the printing device triggered the first industrial revolution. Coal was a source of cheap energy (heat). It was the main fuel for the invented steam engine, which was put on wheels and in boats. It created the logistics never seen before in the history – massive rail and ship networks. Transportation became cheap and accessible. Printing devices allowed information to be replicated and copied cheaply on a scale – something never seen in history before. The (i) discovery of oil and (ii) invention of the phone triggered the second industrial revolution. Oil was a new, much cheaper energy. It was the main fuel for the internal combustion engine. It was put into cars and allowed the creation of a new kind of logistics – personal, cheap, and agile. The phone allowed people on two different locations to communicate in real-time - something was never seen in history before. I love Rifkin's view on the economy from a thermodynamics point of view. The amount of energy in the closed system is constant, and energy only changes forms. He argues that oil, gas & coal fuel the majority of our current economy. These fossil fuels are the primary sources of electricity production. Oil is the primary source of energy for logistics. The more injection of fossil fuels to the economy leads to more GDP. Well, the oil extraction per day peaked in the '80s, and oil price peaked in 2006, which was a massive shock to the whole economy (will not elaborate in this post). What is happening today? We see an emerging new source of energy - renewables, which Rifkin argues, at scale, will become the much cheaper and primary source energy. Emerging new communication technologies like 5G will allow unprecedented connectivity among not only humans but things (known as the Internet of Things, IoT). Cheap, clean energy merged with IoT will be the foundation for new, fully autonomous networks of logistics. This 21st-century smart digital infrastructure is giving rise to a radical new sharing economy that is transforming the way we manage, power, and move economic life. It is where massive opportunities lie for future c2c networks. I genuinely believe Qoorio is one of them. Watch the film here: https://www.vice.com/en_us/article/bj5zaq/watch-vices-new-documentary-the-third-industrial-revolution-a-radical-new-sharing-economy Read the book here: https://www.amazon.com/Third-Industrial-Revolution-Lateral-Transforming/dp/0230341977 NB. It is one of those rare cases when I found the movie better than the book. The book has too many political stories and other things which I account as sales pitches for Rifkin's consulting firm's services, IMO. Rifkin itself is an impressive person. According to The "European Energy Review," "Perhaps no other author or thinker has had more influence on the EU's ambitious climate and energy policy than the famous American' visionary' Jeremy Rifkin. The Huffington Post reported from Beijing in October 2015 that "Chinese Premier Li Keqiang has not only read Jeremy Rifkin's book, The Third Industrial Revolution, but taken it to heart," he and his colleagues have incorporated ideas from this book into the core of the country's thirteenth Five-Year Plan. According to EurActiv, "Jeremy Rifkin is an American economist and author whose best-selling Third Industrial Revolution arguably provided the blueprint for Germany's transition to a low-carbon economy, and China's strategic acceptance of climate policy." Credit goes to Justinas Mačiulis for the film's recommendation. Happy watching!
Watch VICE’s New Documentary, the Third Industrial Revolution
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