Marketplaces Chat w/ Founders of OLX (Fabrice Grinda), Hired (Allan Grant), Inturn (Ronen Lazar)

Neeraj Singhal [12:09 PM]
@channel — A little over 20 minutes before we kick-off our marketplaces chat with Fabrice Grinda, Allan Grant, and Ronen Lazar.

As a quick reminder, here are the question prompts for the discussion:
— What are the right benchmarks for assessing liquidity in your marketplace?
— How has your business adopted strategies for achieving supply, in markets where it is not sticky or persistent? How have you customized this process for different geographies?
— From a venture perspective, how do you model and value a company’s ability to acquire supply and demand?
— Which companies / trends are you most excited about?

Recent article on strategies to achieve liquidity: http://firstround.com/review/How-Modern-Marketplaces-Like-Uber-Airbnb-Build-Trust-to-Hit-Liquidity/

Prashant Fonseka [12:25 PM]
hi everyone

Vinay Trivedi [12:27 PM]
joined marketplaces by invitation from @benjaminzeitz

Neeraj Singhal [12:30 PM]
Alright guys, I think we can get started… thanks so much for taking the time to join everyone

[12:31]
I’ll quickly introduce our panelists: @fabricegrinda — Founder @ FJ Labs, Fmr. CEO @ OLX
@allan — Founder @ Hired
@ronen_lazar — Founder @ Inturn

Josef Feldman [12:31 PM]
Thanks Neeraj! Will share a list of all our participants shortly as well. Hello all

Allan Grant [12:32 PM]
Hi guys. Thanks for having us!

Neeraj Singhal [12:32 PM]
Idea is pretty simple here… tee up a good topic with relevant folks and have an interactive discussion

Ronen Lazar [12:32 PM]
Hi! Thanks for hosting this panel

Neeraj Singhal [12:32 PM]
With that in mind… let’s kick off… I’ll start with you Allan, what are you looking at in terms of benchmarks for liquidity in your business (Hired.com)

Allan Grant [12:33 PM]
For us at Hired, we have a singular mission of “getting people jobs they love” — so the ultimate sign of liquidity is people actually getting hired.

[12:34]
That’s a late funnel metric and there are some early indicators that are important to getting there

[12:35]
On Hired, companies send “interview requests” to candidate, which starts the whole process of generating a hire. So one way to tell how much liquidity exists in a market is based on the number of interview requests (IVRs) in a given time period.

Stephen Yang [12:35 PM]
joined marketplaces by invitation from @benjaminzeitz, along with @davewolfson

Allan Grant [12:35 PM]
Because talent can be segmented into different roles, skill sets, and locations — we don’t think of ourselves as a single marketplace; we are a collection of many markets.

[12:36]
So we measure liquidity across each sub-market — whether early signs such as IVRs, ultimate results such as hired, or intermediate metrics between those two.

[12:36]
I.e. Ruby engineers in SF, or designers in NYC.

[12:36]
One last thing to add…

[12:37]
In addition to measuring liquidity — which are ultimately “transaction metrics” — we also measure the two sides: supply and demand. Those are measured independently and probably a topic for another discussion.

Neeraj Singhal [12:37 PM]
@ronen_lazar & @fabricegrinda feel free to chime in on your company and the portfolio of companies you’ve built.

Josef Feldman [12:37 PM]
@allan sounds tricky to master! is there anything you guys do on a geographic basis to monitor / balance supply & demand?

Evan Maclin [12:38 PM]
joined marketplaces by invitation from @benjaminzeitz, along with @marc. Also, @nkrobles joined.

Allan Grant [12:38 PM]
We track engagement of each “unit” (candidate or employer) individually to see if they are getting what they want.

[12:39]
For example is the candidate being viewed and getting IVRs? Is the employer browsing and reaching out to candidates.

Deepak Masand [12:39 PM]
joined marketplaces by invitation from @benjaminzeitz

Allan Grant [12:39 PM]
A market may have liquidity for most participants but still be missing out on needs of a few players.

[12:40]
If we can’t generate the liquidity then we don’t let those players into the market until we can — that’s our “curation” approach.

[12:40]
Better to not let someone in (yet) than to disappoint them with the experience.

Fabrice Grinda [12:41 PM]
I will answer separately for OLX and companies we are evaluating from an investment perspective. In both cases ultimately, like Allan we look at late funnel metrics and notably the sell through rate, then it’s a question of scale.

For OLX we shoot for a 40% sell through rate in the general goods category at scale. At scale on average means 5 net new lister / 1,000 capita / day and a 75% marketshare in the country. We end up being in the top 5–10 sites in the countries where we accomplish this. We track this liquidity city by city and category by category. It typically means we end up with 15–30% of the population of the country using the site every month.

From an investment perspective when we invest in 2 sided marketplace at an early stage — say $100–500k / month in GMV if they have a 25% sell through rate then it’s a good sign of early liquidity. Of course depending on what they are selling it maybe at a hyperlocal or regional or national level.

Jay Farber [12:41 PM]
So @allan , when you enter a new ‘market’, how do you seed both sides of the market to go from zero to 100?

Ronen Lazar [12:41 PM]
So INTURN is a B2B marketplace which addresses the complexities of the off price space with initial focus on apparel and footwear. Our marketplace is inherently atypical due to the quantity, depth and quantity of inventory packaged together, confidentiality of the sales efforts to protect brand integrity and the steep decline in inventory value over a short period of time. What’s even more astounding is that price is not always the determining factor for a sale.

Victor Wang [12:42 PM]
joined marketplaces by invitation from @benjaminzeitz

Fabrice Grinda [12:43 PM]
The way we seed varies from marketplace to marketplace. For most we start by getting the supply or sellers because they have a financial incentive to be on the platform and are ok with us not having demand yet. Depending on the vertical we do it through a combination of TV ads, online ads or even a sales team.

[12:43]
Whatever the economics support…

Ronen Lazar [12:43 PM]
Our sell through rates are unusually high as the commodity is product that was selling at a specific price just days earlier and now discounted anywhere from 40–80% off.

Fabrice Grinda [12:43 PM]
at a unit economic level

Allan Grant [12:45 PM]
@jayfarber: we look at entering a new market and achieving initial liquidity as a different “playbook” from growing a market. Specifically our playbook entails first focusing on queuing up demand (companies) since their hiring needs won’t go away while we built up supply, then we build up matching supply, and then we “pre-launch” the market by driving both sides to show up on the same day. Our cadence is new groups of candidates starting every week, so the specific start time makes sense.

[12:46]
The market is then in soft launch for 3–4 months as we gradually increase supply for the demand we have (since a company can hire many people, but a candidate only gets one job), as well as bringing in other facets of demand (companies hiring different skill sets).

[12:47]
Once we hit a target goal of liquidity, we announce that the market is now launched, and do PR around it — driving more on both sides knowing we won’t disappoint.

Neeraj Singhal [12:47 PM]
Very interesting… at Uber, we have very specific liquidity goals in mind for operating our cities and countries. Different model of marketplaces, and perhaps easier given it’s a very clear 2-sided marketplace, but we looked at Supply liquidity, which is essentially, are there enough cars on the road for a rider to get a car in under 5 minutes (this varied by country/city… for example, India’s benchmark was 8 minutes, whereas US cities was 3 minutes). and on the demand side, we had to make sure the total amount of fares accumulated for a driver was greater than the next alternative opportunity to earn, making them just a little over ‘indifferent’ between choosing Uber as a platform to earn and another hourly earning opportunity.

Jay Farber [12:47 PM]
Interesting…don’t expose the two sides to each other (launch) until the sell through rate would hit a minimum threshold

Allan Grant [12:48 PM]
Exactly

Neeraj Singhal [12:49 PM]
@ronen_lazar — How have you gone about boosting supply in new markets, and what are your early thoughts on ways to boost this?

[12:51]
And @fabricegrinda — While Ronen is typing, since you also represent the Venture side of our panel… how do you model and value a company’s ability to acquire supply and demand?

Ronen Lazar [12:51 PM]
the most complex part of our marketplace is the lack of consistent process on both the supply and demand sides

James Holcome [12:51 PM]
joined marketplaces by invitation from @nick

Ronen Lazar [12:51 PM]
So we’ve created efficiency layers for both pre and post transaction

[12:53]
On the supplier side (brands) our platform becomes their visibility into their business and allows them to be more proactive. We enable them to curate assortments of goods and include all the appropriate data and visuals. The platform allows them to analyze margins continuously and once a deal is done, enter orders. All this was manual prior to us launching.

[12:54]
So the suppliers are excited even to benefit on the efficiency we offer as it creates both tangible and intangible benefits instantly

[12:55]
So we’ve taken a very systematic approach to build market networks surrounding suppliers that are private or pubic and help them innovate their processes

Fabrice Grinda [12:55 PM]
We are very unit economic driven. We want the company’s net contribution margin per customer over the first 18 months to be 3–4x the fully loaded customer acquisition cost of supply + demand. Let’s say they use Google as a successful paid channel where the economics seem to work based on the early cohorts we are going to check that there is enough volume in the channel that they can keep scaling. We have come to realize most businesses don’t have viral coefficients above 1 so paid acquisition is key and it’s important to find both channels where the economics work and that are scalable.

A bit of a non-sequitur, but one of the ways we found to dramatically lower CACs is to offer a super verticalized experience and by really talking the talk of the suppliers the way Mindbody has done it in a few verticals.

[12:56]
From a unit economic perspective btw it typically means for the marketplace to work you need either a high average order value or recurrence (or both).

[12:56]
That’s why I am skeptical of models like Shyp

Neeraj Singhal [12:57 PM]
@ronen_lazar — Has this been a tough process in your International markets?

Josef Feldman [12:57 PM]
@channel Getting requests for the full attendee list. Here it is! Feel free to connect with each other directly.

Also we have one more addition to the panel — @dkalt123 founder of Reverb.com who will share his thoughts as well.

Fabrice Grinda, Co-founder, FJ Labs, Co-CEO, OLX
Allan Grant, Co-founder, Hired
Ronen Lazar, Co-founder and CEO, INTURN
David Kalt, Founder and CEO, Reverb.com
Alex Levin, VP of Expansion, Handy
Vinay Trivedi, Sandbox Network
Xing Xin, Business Development and Growth, Beepi
Tyler Infelise, Head of Product, Beepi
Luke Fryer, Founder, Harri.com
Travis Ing, Associate, Hearst Ventures
Gunnar Froh, Founder, Wunder
Li Jin, Investment Partner, Andreessen Horowitz
Guimar Vaca Sittic, Partner, FJ Labs
Tessa Wanders, Associate, FJ Labs
Arne Halleraker, FJ Labs
Nick Greenfield, COO, Paribus
Stephen Varady, Founder and CEO, Slang
Karthik Sridharan, Co-founder, Kinnek
Ilias Beshimov, VP of Growth, Good.Co
Sage Ramadge, Executive Director, InSITE Fellows
Dana Goldstein, Head of FP&A, Etsy
Thomas Bailey, Founder, Hatch Capital
Matt Heiman, Investor, Greylock Partners
Joshua Goldstein, Co-founder, Underdog.IO
Evan Maclin, Business Development Manager, Zeel
James Holcombe, Expansion Manager, Zeel
Nick Ober, Growth, Zeel
Muzzammil Zaveri, Partner, KPCB
Jay Farber, Associate, F-Prime Capital Partners
Morgan Polotan, Investor at Bloomberg Beta
Mohamed Haouache, OuiOpen
Prashant Fonseka, Associate, Crunchfund
Neeraj Singhal, Entrepreneur-In-Residence, FoundersGuild
David Wolfson, Partner, FoundersGuild
Josef Feldman, Partner, FoundersGuild

Mohamed Haouache [12:58 PM]
Mohamed Haouache, Storefront

Ronen Lazar [12:58 PM]
Interesting it hasn’t been as difficult as we imagined. We launched our North American marketplace in May 2015 and by September we were operating in Europe.

[12:59]
On the supply side there are brands always looking to sell their goods outside their primary market. On the demand side, since off price isnt as heavily built up outside the US and most brands don’t produce product for the off price market internationally, there is a built in demand

Neeraj Singhal [1:00 PM]
Welcome @davidmort! Would love to hear your thoughts on assessing the right benchmarks for liquidity in your business, and how you’ve gone about building up your supply side.

[1:00]
Apologies. Welcome @davidmort !

David Kalt [1:00 PM]
Thanks Josef, Reverb is a marketplace where musicians can discover, and purchase instruments and gear to help them make their music.. A potential global audience of 100 million indviduals, representing approx. $25 million in global GMV a year. We approach our liquidity problem by thinking about the bid/ask spread in pricing.

[1:01]
We have between 500,000 and 750,000 listings on our site at any given moment and our challenge is pricing differentiation and discovery.

Neeraj Singhal [1:02 PM]
Welcome @dkalt123 — The other David is also welcome, but his response is not as urgent.

[1:02]
3rd times a charm.

David Kalt [1:02 PM]
Since there are thousands of similar listed guitars with different condition, age, finish, shipping cost, etc — — the ability to distinguish pricing transparency has been the greatest driver in our growth trajectory.

[1:03]
We have built an extensive price guide, and delivering tons of related content to help drive price transparency. we combine that with negotiation and messaging capabilities that empower buyers to get fair and accurate pricing with every order.

Neeraj Singhal [1:04 PM]
@fabricegrinda @allan @ronen_lazar @dkalt123 — What are some interesting innovations you’re seeing, and what are you most excited about?

David Kalt [1:04 PM]
The more pricing transparency, the more musicians are willing to purchase their next piece of gear knowing that there is a market for it. Liquidity drives confidence which drives transactions.

David Mort [1:06 PM]
joined marketplaces by invitation from @neeraj

Ronen Lazar [1:06 PM]
I’m most excited about data transformation innovations that remove integration requirements. In retail that is by far the biggest hurdle tech companies are facing. By removing this barrier and even better, enabling both sides of the marketplace to resonate with the offering based on their own language, it delivers immediate success.

David Kalt [1:06 PM]
Personalization Engines is a crucial technology that we are investing in to deliver the most relevance to our end-users.

Fabrice Grinda [1:07 PM]
One clear trend we are seeing is that the best practices of consumer facing marketplaces are now being brought to B2B marketplaces where you can have the holy trinity of high margins, high average order value and high recurrency. The key is picking the verticals where supply and demand are sufficiently fragmented (to avoid margin compression and disintermediation) and where the sales cycles are not too long. My favorite example of this is Flexport

[1:08]
But Zesty, Grubmarket, Partmyride all fall in this category

Neeraj Singhal [1:08 PM]
@dkalt123 — Can you explain the concept of personalization engines in a bit more detail? Would love to hear more about how this can be applied to other marketplaces as well.

David Kalt [1:08 PM]
Old word marketing would focus on PERSONA’s and marketing strategy to groups of like minded individuals.

[1:09]
Our Personalization Engine tracks behavior and finds correlations, that can then create a customized browse/feed experience similar to Netflix.

Allan Grant [1:09 PM]
Within marketplaces, one thing that’s been interesting to see is the birth of new models which only need to build up one side, while tapping into an almost limitless pool on the other side — through paid advertising or hyper targeting enabled by large scale data analysis. For example in recruiting we have a competitor that analyzes publicly available code to identify the right candidates for their customers (companies hiring engineers) without having those candidates ever need to sign up. So they aren’t limited by needing to build up liquidity in each geographic and skill market one at a time — they can service clients practically all over the world. I’ve also seen early signs of similar models being worked on in online dating.

David Kalt [1:10 PM]
When done right, the user doesn’t know it or feel it, and is blown away by the experience.

Josef Feldman [1:10 PM]
@allan brilliant. would love to see more examples

Fabrice Grinda [1:12 PM]
Other fun trends are the use of AI. One of our companies now uses image recognition to suggest the title, description etc. so you no longer need to type it in when placing an item on sale

Ronen Lazar [1:12 PM]
@fabricegrinda Do you find that in some verticals where supply and demand is fragmented that there isn’t enough stickiness to keep people engaged and instead they continuously shop deals around?

Neeraj Singhal [1:12 PM]
@fabricegrinda — Are there any undisrupted yet highly fragmented industries left? If there is, feel free to DM me the other folks here don’t see… :wink:

David Kalt [1:13 PM]
Agreed, using machine learning and AI in our personalization engine is essential.

Fabrice Grinda [1:13 PM]
Many more than you think. Shipping was totally ignored until Flexport (and Cargomatic and others came along)

[1:13]
And AI can be used for quality control / content filtering and much much more

Allan Grant [1:13 PM]
Another interesting thing is what I’ve been calling “2nd order network effects” (perhaps someone knows the correct term for what I’m referring to?). What I mean is moats that emerge through the accumulation of a large number of transactions over time. For example we have tracked the outcome of every single interview that any candidate from Hired has gone on, since 2012. We are building towards a critical mass that will enable us to correlate interview performance with third party data, such as skill assessments, in a way that competitors won’t be able to until they have gone through years of liquidity and very many transactions.

Fabrice Grinda [1:14 PM]
@allan Totally agree. In addition to liquidity being a barrier to entry you can do a better job because you have more data

[1:14]
Another trend I love is marketplaces that offer tools that make people better at their job

[1:15]
www.rev.com is an example of that

Josef Feldman [1:15 PM]
@channel if anyone has any questions for the panel feel free to chime in

Fabrice Grinda [1:15 PM]
The people use their app to do a better job at transciption

[1:15]
They become so much more productive

[1:15]
that they have no incentive to disintermediate or go to a competitor

Neeraj Singhal [1:16 PM]
Yup, if our attendees have any questions, we can use the last couple minutes here to tackle them. Free to free to shoot them out to the group.
Josef Feldman
@channel if anyone has any questions for the panel feel free to chime in
Posted in #marketplacesNov 1st, 2016 at 1:15 PM

Fabrice Grinda [1:18 PM]
BTW Verticalization is continuing unabated. You have a mega trend for instance of more work being gig focused which you have companies like ShiftGig doing an amazing job with. But then for more specialized work we are seeing vertical gig marketplaces like Nomad Health for doctors

[1:19]
And the verticalization of Craigslist & eBay has more legs to run than I anticipated. Reverb is a great example of that. Alongside Chrono24 and many others.

Allan Grant [1:20 PM]
I have a question I’d love to ask the other panelists — something I’ve been thinking a lot about over the past few years: what leads marketplaces to become monopolistic vs oligopolistic?

Sandy Steier [1:21 PM]
joined marketplaces by invitation from @josef_feldman

Neeraj Singhal [1:21 PM]
Before we hit the hour mark here… Just wanted to thank our panelists @fabricegrinda @allan @ronen_lazar & @dkalt123 — Sincerely appreciate you taking the time to give the group some insight and your perspective. And to the broader group, feel free to continue to use this channel to connect with folks and share articles/questions/thoughts. The idea behind ThinkTank is to connect people who are solving similar problems in varying businesses/industries.

[1:22]
People feel free to continue the discussion folks…

Ronen Lazar [1:22 PM]
Thanks for hosting Neeraj

Allan Grant [1:22 PM]
Thank you Neeraj, Fabrice, Ronen, David, and everyone attending! This has been a fun discussion.

Fabrice Grinda [1:22 PM]
Thanks!

Neeraj Singhal [1:23 PM]
My pleasure… and keen to hear responses to @allan ‘s question!

David Kalt [1:23 PM]
Thanks, great idea generation.

Fabrice Grinda [1:24 PM]
@allan happy to discuss the monopoly question too. It’s been on my mind as well in terms of what it takes in terms of network effects (ever more buyers brings ever more sellers etc.), lower CAC from having existing scale / brand + secondary effects of having more data to provide a better user experience.

[1:24]
+ one you are larger and have scale you get more access to capital and you can continue attacking

[1:25]
so even if you were headed towards a 60/40 split your capital advantage keeps allowing you to end up with a near monopoly

[1:25]
BTW it was not obvious ex-ante that classifieds would be a near monopoly

[1:25]
It’s not like auctions you can post on multiple sites

[1:26]
But people don’t bother once a site works better. And because you can’t monetize in a 60/40 split, you really need 85%+ market share you just keep going until you win (or merge until you win)

[1:26]
We spend $500 milion in TV ads in Brazil between us and our competitors and then merged and it was 1+1 = 10

[1:27]
But then in classifieds you end up with a business with 50–75% EBITDA margin

[1:27]
The thing is you can go from losing $100 million / year to $100 million in EBIDTA in less than 18 months once you win

[1:27]
but that dynamic leads to a Nash equilibrium where everyone spends

[1:27]
If I spend you and you don’t I win

[1:27]
If you spend and I don’t I lose

[1:28]
So the dominant strategy is spending

[1:28]
so you end up with a game theoretical framework where everyone spends money like crazy

[1:28]
But the rewards are worth it

[1:28]
but to get OLX to where it is today it cost over $1 billion in TV ads

[1:28]
And LetGo is spending a lot as well in the US to break in vs. Craigslist

Allan Grant [1:30 PM]
I’ve come to a similar thesis. Primarily thinking about 3 factors: 1) liquidity bleed over, 2) lock-in on one side, and 3) cost of access to capital. Limited liquidity bleed over is what makes online dating oligopolistic — you need liquidity in different cities, age groups, cultures; whereas something like eBay has high bleedover between categories and geos. Good example of lock-in on one side is Airbnb’s instant book feature — a seller that turns it on gets more business but can’t cross list on VRBO. And access to capital let’s you purchase liquidity in other markets/subsidizing subliquid areas to provide a better supply/demand aggregation experience for both sides. (edited)

Fabrice Grinda [1:31 PM]
The thing is things like dating or classifieds could be monopolies at a city level

[1:31]
But once you win a city you just keep going

[1:31]
Even though having liquidity in NY does not help you in SF

[1:31]
for the most part

Allan Grant [1:31 PM]
That’s what I mean by oligopolistic.

Fabrice Grinda [1:31 PM]
But if you have more access to capital + expertise you go

Josef Feldman [1:31 PM]
@fabricegrinda fanduel V draftkings is another good example

Fabrice Grinda [1:31 PM]
Yes it’s oligopolistic at the beginning

[1:32]
But I suspect it ends as a monoploy

[1:32]
as people merge + one gets lower cost of capital because of scale, quality of team etc

Nick Greenfield [1:32 PM]
Uber has a massive cost of capital advantage over most players in the on demand (food, transportation, delivery) space and can therefore outspend all competition in multiple verticals in every geography. Is there any way for smaller players to overcome that advantage?

Fabrice Grinda [1:34 PM]
@regularnick By providing a better experience in secondary verticals for sure

[1:34]
What do yo uthink the revenue breakdown is at Uber on Eats vs transportation

[1:34]
I suspect it’s the B team on Uber Eats and a much loower priority

Nick Greenfield [1:35 PM]
100:1

Fabrice Grinda [1:35 PM]
So Postmates / Seamless etc. are probably ok especially since they can differentiate the offering

[1:35]
and quality of experience

[1:35]
etc.

[1:36]
But I would NOT want to be Lyft

[1:36]
or Gett

[1:37]
Especially since Uber could use profitable markets to subsidize supply and/or demand in other markets. Lyft exists at the leisure of Uber. Now Uber may want them around for regulatory reasons

[1:37]
Airbnb is probably a global monopoly btw because people travel internationally.

[1:37]
So liquidity is cross border and cross country

[1:37]
cross city

[1:37]
Uber is more city by city

[1:38]
But if you win NY you can use profits there to subsidize a Lyft city for instance

[1:38]
That’s why I think the oligopoly setup is temporary

[1:38]
and it ends up essentially as a monopoly

Nick Greenfield [1:38 PM]
Isn’t this all true to the point of EBIDTA mattering?

[1:39]
once you have to grow EBIDTA, isn’t it very challenging to continue attempted monopolistic practices to thwart upstart local competition with pricing and subsidies

Fabrice Grinda [1:39 PM]
Well let me give you another example

[1:40]
OLX is now super profitable in 8 countries with EBITDA margin of over 75% (and I mean hundreds of millions of EBITDA / year)

[1:40]
It makes it reasonably easy to then invest tons of money in the next batch of countries we want to win

[1:40]
Like India

[1:40]
Or the US with LetGo

[1:41]
Sorry 50–75% EBITDA margin. Hundreds of millions of EBITDA

[1:41]
So you can still grow EBITDA and invest (or if your investors are patient like Naspers for OLX or Uber’s investors), keep investing in growth

[1:42]
with losses

[1:42]
Especially if the prize is big enough at the end

Jay Farber [1:43 PM]
i.e. Amazon not generating profit for 15 years

Fabrice Grinda [1:43 PM]
Yup

Neeraj Singhal [1:43 PM]
uploaded and commented on an image: BpfMqKzCUAAL7Xw.jpg
1 Comment
Now we’re talking! I want to point to this and offer a thought

Neeraj Singhal [1:46 PM]
Subsidies and discounts make this cycle spin faster… but there is a ton of ‘inefficient spend’ that gets lost along the way. The more you subsidize and discount, the more your customers get used to depending on those discounts to ride. Today’s customer for ridesharing has no loyalty to one brand, so I’d argue there may always be a market for another player. People have Uber, Lyft, Via and Juno on their phones in New York… and who over is cheapest will get the ride. Where this all falls apart is when the rug is pulled from under you, and you have to have an efficient enough operating model and decent enough algo to continue your business without the discounts.

[1:50]
To @regularnick ‘s point earlier (and he was formerly at Lyft for context), EBITDA is overlooked in the short term to try to tackle market ownership in the long term, but I’d argue some players won’t last in the absence of those subsidies. Ola vs Uber, and FlipKart vs Amazon are prime examples of massive spending, with an eye on the long-term… but not sure the players will last is they haven’t built and designed their businesses around the absence of subsidies and investor gravy.

Nick Greenfield [1:55 PM]
to your earlier point @fabricegrinda ‘s, is there’s a difference between vertical ownership of the assets in the marketplace that ultimately give you long term EBIDTA growth? Amazon has invested heavily on fulfillment centers, delivery solutions, etc. At what point should a marketplace think about becoming more vertically integrated? Post liquidity? Day 1?

[1:57]
Airbnb for example has to be thinking about this now as their ability to add supply will at some point hit a wall, even with low rates of churn.

Allan Grant [1:59 PM]
Guys — thank you for the great conversation! Unfortunately I have to jump off, but if anyone wants to continue chatting on any topic, please private message me or @mention me in this room, and I’ll jump back in later tonight.

Josef Feldman [2:01 PM]
Thanks @allan @fabricegrinda @dkalt123 @ronen_lazar great convo!

[2:02]
And thanks @neeraj for moderating. We’ll be doing another marketplace related chat in a few weeks.

Fabrice Grinda [2:07 PM]
@regularnick I am not sure I understand the question, but 2 ways I think of verticalization:
1. In classifieds, we try to win C2C for sale first because it’s the category where people recur (come twice / month on average) as opposed to real estate or cars where it’s once every 5 years. So if you win horizontal c2c you have a platform to then verticalize and win car and real estate c2c and then b2c. That said you first need dominance in c2c for sale before doing any of that.

2. If you mean “offer more services” and “do more work” and extend the value chain it really depends on the vertical. At the end of the day you want to be a marketplace and not take inventory, own the supply etc. Now OLX can add optional payments and work with logistics providers but we don’t want to actually do it ourselves for instance

Nick Greenfield [2:09 PM]
Thanks! That answered my question!

Fabrice Grinda [2:11 PM]
Bye guys! You can find me at [redacted]@fjlabs.com if need be