The Future of Service Marketplaces: What’s Coming Next?
Service marketplaces have come a long way since the 1990s, but we’re only just starting to scratch the surface of what they can do.
Today, a whopping 70% of global commerce is in services, yet only 3% of services are digitized.
Staggering, right?
But this brings up an important question.
Why do the vast majority of services still remain offline?
The best explanation we’ve come across is from Li Jin and Andrew Chen of Andreessen Horowitz. They argue services have been slow to digitize for the following reasons.
- Services are complex and heterogeneous, which makes them difficult to standardize.
- Service success and quality are subjective. An excellent service experience for one customer might not be the same for someone else.
- Services involve human interaction, which is hard to replicate digitally throughout the different parts of a purchase.
- Many services are performed by small businesses that do not have the know-how, tools, and resources to digitize their services.
These challenges have undoubtedly impeded the digitization of many services. They have also directly influenced which services have been digitized so far, and by doing so, have shaped the types of service marketplaces we’ve seen over the last twenty-five years.
The low-hanging fruit
Over the past few decades, service marketplaces have primarily focused on the low hanging fruit — the simple services requiring low to mid-level skills to complete, which can be standardized, packaged, and digitized with little effort. Take ride-hailing and food delivery as examples or any “in-person” type services.
They have also focused mostly on facilitating matching one unverified seller (usually a freelancer or gig economy worker) and an end consumer. In fact, they have tended to offer limited value above and beyond this “matchmaking” role.
Of course, there are exceptions, especially in recent years, as service marketplaces have evolved considerably from the first iterations in the 1990s and early 2000s.
Today, some marketplaces facilitate more complex digital services, provide more advanced features, and take ownership of multiple stages of the service delivery process, delivering added value for buyers and sellers beyond just matching.
To illustrate this evolution in more detail, here’s a quick rundown of the types of marketplaces we’ve seen so far. Again, it’s essential to thank Li Jin and Andrew Chen for their extensive work here.
1.0 The Listings Era
The first generation of service marketplaces included companies like Craigslist and Yelp. These marketplaces were mainly just massive lists of services separated into different categories for consumers to discover. They were B2C and focused on simple services that were delivered in-person, like handyman jobs and massages.
Overall, they didn’t provide much value beyond matching customers with service providers. Consumers were responsible for verifying service providers and were forced to go outside the marketplace to communicate with service providers, book a service, and make transactions. End-users had a pretty restrictive and frustrating experience.
2.0 The Unbundled Craigslist Era
The next generation of service marketplaces included companies like Fiverr, TaskRabbit, and others. These verticalized marketplaces began to address trust between buyers and sellers and the difficulties and frustrations of sifting through long lists to find services.
They added a few enhanced features and better filtering to help users find the right provider more accurately and efficiently. They sometimes enabled communications between buyers and sellers and payments too. The focus remained mostly on simple services and was primarily B2C focused.
3.0 The ‘Uber for X’ Era
Marketplaces like Uber, Lyft, Doordash, Lugg, and others. These marketplaces were primarily driven by the proliferation of smartphones, focusing on on-demand in-person services such as ride-hailing and food delivery. They enabled discovery, matching, communication with service providers, booking capabilities, and transactions all on one application. They also featured enhanced software tools for providers and customers, minimal guarantees, protections, and provider vetting/verification.
4.0 The Managed Marketplace Era
The most recent era of service marketplaces included companies like Opendoor, Trusted, Honor, and others. They removed even more friction between buyers and sellers by facilitating more of the buying and selling process. Many managed marketplaces today enable more complex services compared to prior generations.
They also play a more active role in establishing trust between parties and overseeing and managing service delivery. Many include more advanced software tools for sellers and enhanced guarantees and protections. The focus remained mostly on end consumers, although more platforms have started connecting freelancers and gig economy workers to businesses.
What’s coming next?
Service marketplaces have undoubtedly come a long way since the 1990s, but we’re only just starting to scratch the surface of what they can do.
Even the most recent generation of managed service marketplaces are limited in user experience, the value they deliver to buyers and sellers, and the complexity of services they facilitate. They also remain primarily targeted at unverified freelancers/gig economy workers and are more often than not business to consumer-focused.
In the coming years, the next-generation service marketplaces will offer more superior experiences and play a more central role in the rapidly digitizing global economy. We’ll see a wave of service marketplaces powering a new future of work for highly skilled professionals.
These marketplaces will focus on complex services that have yet to come online and provide immense value and efficiencies that enable service-based businesses to grow and scale worldwide.
Rather than focusing on unverified freelancers/gig economy workers and individual consumers, there will be a greater focus on verified professional service providers, agencies, and SMEs.
Service productization & product bundles
Next-generation B2B service marketplaces will enable highly skilled professional service providers to rapidly transform complex services into standardized and marketed products.
They will also allow customized bundling of different complementary services into discounted packages based on buyers’ needs.
Enhanced and efficient productization and service bundling will empower service providers to become more efficient, increase their sales, and scale their business.
Buyers will also benefit from greater clarity in the way services are presented, allowing for a better and more immediate understanding of service scope, deliverables, and outcomes.
Ultimately, productization will enable buyers to purchase complex services through a smooth shoppable experience similar to what they’re used to when buying goods on Amazon and Alibaba.
Composite services
Future B2B service marketplaces will have the capacity to go beyond facilitating the sale of a service between one seller and one buyer.
They will enable efficient and collaborative workflows so that multiple buyers and sellers can interact and conduct ongoing collaboration on long-term projects and transact on the same platform to deliver multifaceted composite services.
With the ability to complete complex projects that require services and skillsets from various providers, buyers will enjoy increased efficiencies as the time needed to seek out and find multiple service providers is significantly reduced.
High-impact embedded financial services
The next wave of B2B service marketplaces will delve deeper into the provision of financial services. They will be designed to enable the quick and easy integration of high impact banking and financial services via APIs that drive business growth and help SMEs become more efficient.
By offering a range of financial services, from simple payment and financial planning services to insurance, loans, and trade finance, marketplaces will enjoy increased customer stickiness, loyalty, and retention.
They will also experience increased revenues from transaction fees and enjoy more significant opportunities to build other services that produce alternative revenue streams by leveraging increased financial and business data flows.
Business intelligence & analytics
Thanks to advanced business intelligence & analytics, the service marketplaces of tomorrow will enable small and medium-sized service providers to become data-driven organizations.
Powerful analytics and lead generation tools will use business and marketplace data to provide real-time actionable insights and concrete recommendations that are easy to consume on one centralized visual analytics dashboard.
These insights will help service providers better understand their operations and customers and make them more effective at attracting higher-value clients.
Predictive analytics based on advanced machine learning algorithms will use past and current data to forecast trends and behaviors to help businesses retain and grow their most profitable customers and drive future sales.
Filtering & recommendations
The primary role of a marketplace is to help users find a product or service. The next generation of B2B service marketplaces will excel at this as they will be built on more advanced AI-driven search engines that can intimately understand what buyers want so they can efficiently match to the right service provider.
They will provide unprecedented filtering options presented in a simple way for buyers to understand and interact with, following a user’s logic and expectations.
Advanced filtering capabilities that help match buyer interests to seller capabilities, pricing, ratings, delivery success, together with sophisticated recommendation algorithms that help buyers discover valuable complementary services, will result in increased matches and superior user experiences.
Secure digital credentials
The next wave of B2B service marketplaces will usher in the beginning of the end of fake reviews and credentials to enable unprecedented trust between buyers and sellers.
This will be achieved using blockchain technology to secure digital credentials, issuing digital certificates with embedded metadata about identity, skills, achievements, and verified reviews history.
Ultimately, blockchain-based digital credentials will allow service providers to rapidly build trust and reputation, resulting in a more assured purchasing experience for buyers and a faster sales process.
Anthony is the Chief Content Officer at Intrepid, a global marketplace community to buy and sell professional technology and creative services.
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