Marketplace 2018 conference in Berlin
This week I attended Marketplace 2018 conference in Berlin organized by Speedinvest, Autotech Ventures, Market One Capital and Point Nine Capital.
Here is my short summary of a few favorite talks I was lucky to catch.
First “keynote” session was by Niall Wass and Jambu Palaniappan, previously early-employees at Uber, now Atomico. Great speakers with interesting strategic insights. Here are a few key takeaways for me:
- Incentivizing supply to build supply: Uber had a separate app for drivers which were able to attract new drivers for a referral bonus. The app also had community and onboarding features which enabled drivers to onboard new drivers and help newcomers with advice. I have found the app in question, it is called UserDost.
- Elasticity drives utilization and earnings. For Uber, it meant that drivers were able to earn more per hour, while clients were paying less because of an efficient technology that minimized wait/idle time. This kind of situation has enabled both parties of the marketplace to get a “win-win” outcome. The key factor here was that both clients and drivers were incentivized by shifts in price. Generally, price incentivization for supply works well if the supplier earns more per hour than anywhere else.
- Impact of empowered teams: “CEO of your city” model. City by city scaling requires strong leaders within new cities who act as local CEOs.
- Playbooks are essential for scaling en-masse. Playbook for marketplace scaling is a manual used for launching on a new market. When given to a talented person it enables them to repeat the standard procedures and operations to attract and manage supply, and build the first acquisition of demand. This, in turn, will lead to the predicted successful outcome.
- Good experience spreads, supply experience matters. A common mantra on marketplaces is that the business should focus on the side that pays money, often disregarding the opposite side, which is critical for marketplace health.
- It’s better to ask forgiveness than permission. Act decisively and apologize for it later, rather than seek approval to act and risk delay, objections, etc. This will help you scale, but may sometimes backfire.
The next talk on my list was by Josh Breinlinger. Josh also has an amazing blog where his thoughts are explained in detail.
- The frequency of transactions combined with the size of a transaction is essential to marketplace success. The frequency of taxi usage or food delivery is high enough to compensate for low transaction value. But on the contrary, locksmith marketplace can hardly be operational. It can hardly be used more than a few times in life, even though the transaction size can be as much as $100. Domains with low frequency are naturally aggregated by umbrella marketplaces like Thumbstack or Care.com. Here is a great slide by Josh illustrating that:
- More marketplace value (more managed marketplace) — more rake. Josh has also written a detailed article on this: http://acrowdedspace.com/post/172383900012/marketplace-rake-factors nothing to add here, just wonderful structured content.
- “Supplier picks” model is the easiest way to achieve 100% fill rate (e.g. Uber). But it also requires commoditized supply resource.
- Marketplaces spend too much time on the screening process instead of retaining the best sellers and expelling the worst. This is exactly our reasoning at Preply, where we build ML algorithms to optimize ranking and let the Holy Math decide what the best supply is. Separating supply into tiers is a great idea worth exploring.
- Fraud is sometimes good. You cannot win over fraudsters, it is the “attack-defense” cycle. But if fraud level is too low — it means you are over-optimizing and hurting your growth.
- Josh also provided tips on how to hack liquidity. It is described in details in his article here: https://pando.com/2012/11/20/liquidity-hacking-how-to-build-a-two-sided-marketplace/ Bonus: in the article, there is an answer to what came first: the chicken or the egg.
- Never match “new” supply with “new” demand, but you can try to match “new” supply with “old” demand. At least one party will know how the platform works and risks will be reduced.
- Network effects subside over time. This article on reinforcing network effects was mentioned. So I will just leave it here as a treasure of good content)
Benjamin Grol from Atomico, made a presentation on Product led growth. I was surprised with how technical it was, fully enjoyed it as an operational CTO :) More details are available in Benjamin Grol’s blog post on Medium.
- Launch weekly on mobile, continuous deployment for the web. Enablers for these are decoupled services and e2e coverage (e.g. selenium).
- Launch multiple validated A/B tests per week to maximize the learning rate. This resonates well with the approach of Arthur Kosten (booking.com): setting up A/B testing as a process to strive for continuous increments daily.
- Highly autonomous bottoms-up teams that execute against clearly defined metrics. North star metrics that guide the whole organization. Accessible data-analytics that can be used across the organization.
- Weekly sprints help focus on execution and attack Parkinson’s law which states that “work expands so as to fill the time available for its completion”. This topic also resonated with the session by Michael Wolfe “Building Company operating System” which I listened to at Point Nine Barcelona Summit just a month ago.
- Control mobile app features with server controls. We are not there yet but this will be interesting to explore in the future.
- Growth framework from Reforge was mentioned. Happy to have our new VP of Growth — Yara Paoli already pushing this within the first month at our startup.
The last session I was able to attend between the meetings, was “Reimagining the winning marketplace” by Sonali De Ryker from Accel Partners and Thomas Plantenga from Vinted.
Sonali talked about the evolution of marketplaces and provided an overview of what is required to build a winning marketplace. In short, it is more vertical integration and a full-stack model, where the marketplace builds defensibility by tight integration into the domain vertical.
Thomas was telling a personal story on how he joined Vinted (the biggest second-hand marketplace in Europe) as a consultant and then became CEO. The story was super motivating and personal. Vinted turnaround is described here, but the live story was a lot more interesting. Thomas attributed the agile ability of Vinted to survive to its post-Soviet origin as the startup from Lithuania. That’s what I also see at Preply, — our journey over the six years was harsh, but we never gave up. I think the English word “grit” is the most accurate description of this quality possess.
As a closing remark, prior to the conference, I have received the most recent article from Andrew Chen to my mailbox about the future of marketplaces. It has an overview of what will be happening on the marketplace market over the next few years. Some ideas overlap with ideas presented at the conference. Full-stack vertical integrated marketplaces will be able to provide much better customer experience in numerous verticals. We at Preply believe that a happy customer is better for business so we will explore all the new opportunities to make our customers happier. Stay tuned)
