AN OVERVIEW
Understanding online marketplaces
More than 70 useful resources on online marketplaces and related topics.
Physical markets and marketplaces have connected buyers and sellers for centuries. However, since the mid-1990s online marketplaces have arrived in most environments. While they initially occurred primarily in B2C (or C2C), they have reached B2B in recent years. And while they were first launched primarily by venture-backed startups, they are now also initiated by established companies. Today, online marketplaces play a substantial role in our economy and understanding them will become increasingly important for many professional careers.
On my own marketplace journey so far, I have found the vast amount of resources on online marketplaces and related topics, that have been published by experts in the field, particularly helpful. Over time, I have therefore collected a list of articles, presentations, podcasts, spreadsheets, etc. As I believe this information can be valuable to other marketplace founders and managers as well, I have decided to publish this overview of resources on online marketplaces and related topics. The overview is certainly far from complete, but rather meant to be a starting point, which evolves over time.
I clearly want to state that I am not the author of (most of) the resources included in this overview. If you are the author of any of these resources and do not wish for it to be included, please simply drop me a message. If you would like me to include further resources on related topics that you have found useful, please also let me know. I plan to update this overview on a regular basis. Enjoy browsing and reading!
Structure of this overview
I have structured the resources in this overview in the following six chapters:
- Top picks
- Business model
- Operations
- Network effects
- Trends & markets
- Case studies
At the beginning of each chapter you will find a short explanatory introduction. The structure is certainly not exhaustive and will evolve over time, as I add further resources. For now, it tries to highlight the core theme of each resource and thereby hopefully allows you to identify what you are looking for. Please note that some resources also touch upon marketplace-adjacent topics (e.g. other types of businesses with network effects).
Top picks
The list is already quite long and it will hopefully become even more comprehensive over time. For those of you who cannot allocate too much time, I strongly recommend these ten resources (even though some of them are relatively long, too).
- All Markets Are Not Created Equal: 10 Factors To Consider When Evaluating Digital Marketplaces by Bill Gurley
- Four Questions Every Marketplace Startup Should Be Able to Answer by Jonathan Golden
- The Speedinvest x Marketplace Scorecard: How to evaluate marketplace businesses by Philip Specht
- A Rake Too Far: Optimal Platform Pricing Strategy by Bill Gurley
- How the 100 largest marketplaces solved the chicken and egg problem by Eli Chait
- Lessons Learned Scaling Airbnb 100X by Jonathan Golden
- 10 Marketplace KPIs That Matter by Andrei Brasoveanu
- The Network Effects Manual: 13 Different Network Effects (and counting) by James Currier
- What’s Next for Marketplace Startups? by Li Jin and Andrew Chen
- The Two-Sided Network Effect — How Omni Bootstrapped Marketplace Liquidity by Reforge Team and Ryan Delk
Business model
Online marketplaces facilitate transactions of goods and services between buyers and sellers, typically without building an inventory themselves. For the matching of the two parties, they take a margin of the overall transaction volume, which varies depending on industry and size of transaction. In order to build a profitable business, online marketplaces therefore typically require either a high frequency of usage or a high transaction volume. Still, as Bill Gurley puts it:
“Some industries are much more susceptible to the arrival and success of online marketplaces than others.”
This chapter lists resources that help to understand the business model of marketplaces, its nuances and variations, as well as beneficial and detrimental circumstances in more detail.
- All Markets Are Not Created Equal: 10 Factors To Consider When Evaluating Digital Marketplaces by Bill Gurley
- The Guide to Marketplaces, Second Edition. by Angela Tran Kingyens and Boris Wertz
- Marketplaces (YouTube video) by Jeff Jordan
- Four Questions Every Marketplace Startup Should Be Able to Answer by Jonathan Golden
- Not All Marketplaces are Created Equal: Tales of a Marketplace Founder by Dave Lu
- Finding The Next Billion Dollar Marketplace: 6 Questions to Ask Yourself by Dave Lu
- The Ingredients For a Successful Marketplace by Josh Breinlinger
- The Speedinvest x Marketplace Scorecard: How to evaluate marketplace businesses by Philip Specht
- The Marketplace Calculator by Arteen Arabshahi
- The 20/20/20 Rule for Marketplaces by Tianxiang Zhuo
- What All Successful Marketplaces Have in Common by Dave Bailey
- Why “Uber for X” startups failed: The supply side is king by Andrew Chen
- Four Strategies to Win Big with Low Frequency Marketplaces by Casey Winters
- Why Some Platforms Are Better Than Others by Jonathan A. Knee
- 10 marketplace monetisation strategies by Pawel Chudzinski
- A Rake Too Far: Optimal Platform Pricing Strategy by Bill Gurley
- Service & Marketplace-model fit by Parth Sethi
- Anatomy of a managed marketplace by Ezra Galston
- The Evolution of Managed Marketplaces by Anand Iyer
- The Case For B2B Marketplaces — The 4 Kinds of B2B Marketplaces by Robin Dechant
Operations
Even if an industry bears potential for an online marketplace, building and operating an online marketplace is extremely tough and a highly uncertain endeavor. Or as described in an article by Greylock Partners:
“Building an enduring marketplace is a near impossible feat.”
One of the various challenges that founders and managers of online marketplaces typically face is acquiring initial supply and demand, i.e. solving the “chicken and egg” problem. This chapter presents resources that provide useful recommendations to overcome some of the critical challenges when building and running an online marketplace and to develop an understanding of important marketplace KPIs.
- How the 100 largest marketplaces solved the chicken and egg problem by Eli Chait
- Liquidity hacking: How to build a two-sided marketplace by Josh Breinlinger
- Lessons Learned Scaling Airbnb 100X by Jonathan Golden
- Marketplace liquidity by Borja Moreno de los Rios
- How To Grow A Marketplace by Dinesh Thiru
- 28 Ways to Grow Supply in a Marketplace 📈 by Lenny Rachitsky
- Paving The Way To Marketplace Liquidity by Greylock Partners
- How Modern Marketplaces Like Uber and Airbnb Build Trust to Achieve Liquidity by Anand Iyer
- 5 Tips For Building A Two-Sided Online Marketplace by Boris Wertz
- Starting a marketplace is hard. Scaling a marketplace is harder. by Oisin Hanrahan
- 5 Keys To Rule Your Marketplace by Jean de La Rochebrochard
- Marketplaces and pricing by Parth Sethi
- Building hyper-local multi-country platforms by Mathias Ockenfels
- Fundraising Framework for Marketplace Startups in 2016 (in my opinion, still relevant) by Pawel Chudzinski
- The Marketplace Funding Napkin 2018 (update to the previous link) by Julia Morrongiello
- 10 Marketplace KPIs That Matter by Andrei Brasoveanu
- The (Ultimate) Guide for Marketplace Analytics by Willy Braun
- How to measure CAC in a two-sided marketplace by Natalie Luu
- The Anatomy of a Marketplace by Leah Busque
- Ten Lessons Learned Investing in Early Stage Marketplaces by Mathias Ockenfels
- How Not to Build a Digital Marketplace by Jen-Yie Chen
- Marketplace: From Broker to Full Stack Operator by Robin Dechant
Network effects
Network effects are the most important source of defensibility for online marketplaces (and other related businesses). Still, not a lot of people understand them in detail. In short, network effects arise when every new user of a product or service increases the value of that product or service to every other user. And as identified in a study by NFX:
“Network effects have been responsible for 70% of all the value created in technology since 1994.”
Understanding the different types of network effects and how they might evolve is critical to successfully build a marketplace business. This chapter therefore presents resources that help to understand network effects, the different types, their dynamics, and the common misconceptions.
- 70% of Value in Tech is Driven by Network Effects by NFX
- The Network Effects Bible by James Currier
- a16z Podcast: Not all Network Effects Are Created Equal with James Currier and Anu Hariharan
- All about Network Effects by Anu Hariharan
- Network Effects (a more academic perspective with links to many papers) by Arun Sundararajan
- You Think You Understand Network Effects, but You Probably Don’t by Matt Ward
- The Network Effects Manual: 13 Different Network Effects (and counting) by James Currier
- The 5 Types of Network Effects and How To Hack Them by Matt Ward
- The Dynamics of Network Effects by D’Arcy Coolican and Li Jin
- 16 Ways to Measure Network Effects by Li Jin and D’Arcy Coolican
- Hidden Networks: Network Effects That Don’t Look Like Network Effects by D’Arcy Coolican
Trends & markets
The first online marketplaces emerged in the mid-1990s (e.g. eBay and Craigslist). Since then, marketplaces have tackled many industries and have evolved from “simple” listings to managed marketplaces. This chapter introduces resources that describe this evolution of online marketplaces. While not all of these resources are up to date, they help to understand how online marketplaces have evolved over the past 20 years and how they will most likely generate value in the future.
- What’s Next for Marketplace Startups? by Li Jin and Andrew Chen
- The Three Stages of Online Marketplaces by Casey Winters
- The Evolution of Marketplaces by Fabrice Grinda
- The future of online marketplaces by Yoram Wijngaarde and Ivan Draganov
- My marketplace predictions for 2016 (and beyond) by Mathias Ockenfels
- Empowering the European Digital Ecosystem (YouTube video) by Fabrice Grinda
- Mapping the European B2B Marketplace Landscape by Julia Morrongiello
- 8 Things to Consider When Building Managed Marketplace Companies by Li Jin
- The Next 10 Years Will Be About “Market Networks” by James Currier
Case studies
As mentioned earlier, online marketplaces have emerged in many industries and variations. Some have been massive success stories, others have failed. While the previous chapters have presented resources on some of the fundamental underlying concepts of online marketplaces including selected examples, this chapter lists case studies from different perspectives that hopefully fill the above concepts with life.
- The Two-Sided Network Effect — How Omni Bootstrapped Marketplace Liquidity by Reforge Team and Ryan Delk
- Procsea, the revolution of the B2B fish market by Sebastián Fernández-Medrano
- What Etsy’s S1 Filing Taught Me About Marketplaces by Nicolò Ungari
- TaskRabbit’s pioneering marketplace model & missed growth opportunities by Reforge Team
- DogVacay case study of the ten marketplace success factors by Bill Gurley
- Why Mapudo failed by Christian Sprinkmeyer, Niklas Friederichsen and Markus Weiland
- The Network Effects Map | NFX Case Study: Uber by James Currier
- Uber’s virtuous cycle. Geographic density, hyperlocal marketplaces, and why drivers are key by Andrew Chen
- Five Surprising Things in Lyft’s S-1 by Justine and Olivia Moore
- Uber Is Going to Zero and Their VC Backers Know It by Matt Ward
- Uber and Airbnb: Not All Marketplaces are Created Equal by Deepak Ravichandran, Jeff Lu and Roger Lee
- The NFX of Trulia: Building a $3.5 Billion Marketplace by Pete Flint
- Unpacking Upwork’s S-1: Metrics & Lessons for Marketplaces by Justine and Olivia Moore
- Network Effects Predict the Future of Facebook by James Currier
Many thanks for browsing and reading. As mentioned above, please reach out in case you would like me to add / delete resources to / from this overview or have any comments.