consumer marketplace fundamentals (cornell johnson school 2013)
DESCRIPTION
I delivered this presentation to second-year MBA students at the Samuel Curtis Johnson Graduate School of Management at Cornell University in 2013. The goal of this presentation was to provide background on the P2P marketplace business model, and apply this to specific industry cases.TRANSCRIPT
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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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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
17 Rishi Dean – www.rishidean.com
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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
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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
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1) Industry Selection Putting the odds in your favor
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Characteristics of good industries
Big
Ripe
Plentiful
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Addressable customers
Frequency of transaction
Transaction size
Potential amount transacted via the platform is large
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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
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¡ Adoption
¡ Liquidity
¡ Pricing
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10x value proposition
“Prime the pump”
Lock in scarce supply
Attract users and provide instant utility
Onboarding + Activation
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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
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¡ Control
¡ Scale
¡ Competition
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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