How to win as a marketplace

To oversimplify, the marketplace with the best user experience wins¹ . Which, as a product person, is one of the reasons why I love marketplaces² .

Outside of marketplaces, companies can win despite a subpar user experience: the sales and success teams are great, customers are locked into multi-year contracts, switching costs are high, the brand is strong, compliance and regulatory requirements, patents, etc.

But in marketplaces, you gotta earn it. So let’s talk about what earning it means:

1. You’re selling what I’m buying. Marketplaces aren’t about having the most things to sell, or the most sellers on the platform³ . It’s about having the right, diverse set of things that match the diverse set of needs and desires from buyers⁴ .

2. I can actually find what I want. This is about discovery. Does the buyer need help in figuring out what they want? How good is the search, browse, and personalized recommendation experience? Is there a sufficient amount of detail to give the buyer the confidence to take action? Is it easy, fast, secure, clear, predictable?

3. Your marketplace does #1 and #2 better than the competition. Buyers have tons of alternatives: other marketplaces, social media, family & friends, shopping retail. Every advantage matters.

I’m glossing over a ton of strategic and tactical complexity: seller acquisition, seller commodification, and seller onboarding; pros and cons of different revenue models and how that affects take rate; traffic acquisition challenges in a world of declining SEO traffic; in-marketplace advertising; the dangers of marketplaces trying to also sell platform SaaS to their sellers; data quality; trust & safety; and more. We’ll get to those topics in the future, but we need to build up to it.

I encourage everyone to read Ben Thompson’s Aggregation Theory. So much of my foundational understanding of marketplaces is thanks to this.

Thanks to everyone who responded in yesterday’s poll with overwhelming interest in marketplace content. I’ve been intimidated by the challenge of fitting a ton of interconnected concepts into a small space. Please let me know if I’m on the right track and if you’d like to see more.

The Workshop

This is a newsletter-only section where I share a half-baked idea in hopes that y’all who are smarter than me can work it out with me.

We just crossed 100 subscribers! I launched this newsletter just shy of a month ago (on my birthday, April 20) and I told my wife Karla that I would keep doing this if I could get 50 subscribers, so please know how grateful and humbled I am that all of you are here with me.

I’m an aggressive unsubscriber of email newsletters, so I take with great seriousness the privilege of being in your inbox 3-4x a week. Thank you.

With apologies for all the eye rolls that this might induce (“Dave, you’re such a PM”): I’m still working out what my Product Market Fit hypotheses are for my efforts here. The core of it is wanting to give back to my younger self, particularly 2008-2016 when I made a ton of mistakes, in hopes that it can also help others avoid those same mistakes.

I also want to eventually foster some actual community, where y’all can talk to each other as much as with me. For advice and networking, yes, along with comments and reactions to my content or others’ content. But I also keep coming back to this idea of group therapy for people who work in tech. I’m not sure exactly what that means, but my subconscious is working on it. I don’t think we have the critical mass yet to any of this yet, but hopefully we will one day.

Happy Friday, everyone! Enjoy your weekend.

1  Because better user experience → more demand → more supply → better user experience.

2  The other is the interconnected complexity of it all. A change in one place will impact other places, and that web of cause and effect is really fun to figure out. Plus, I really enjoy helping SMBs (typically the supply side of a marketplace) succeed, freeing them up to get back to doing what they love to do instead of worrying about customer acquisition.

3  Revenue models can make this statement more complicated. If you (as the marketplace) are charging sellers a fee to list an item for sale, or charging them a subscription fee to be a seller at all, then there might be organizational pressure to maximize those KPIs. I argue those are proxy metrics, despite them being revenue measures. If a seller isn’t getting sales (because there aren’t enough buyers, aren’t the right kind of buyers, the buyers can’t find the seller’s items, etc), eventually the seller will give up, and the seller revenue will decline. You gotta earn it.

4  One thing that made Airbnb special was how they introduced differentiated supply, expanding for buyers the possible universe of what they could want to buy.