Market Liquidity for our AI Model Marketplace
What is this? And, why is it relevant for us at Volant AI?
— — — Words of Sachin R.
Early last week I was asked the following question:
“Do you have market liquidity in your app store yet?”
Initially, I was stumped by the question. I’d only heard a little about market liquidity in relation to the stock market and as a non-economics/finance major with little interest in financial markets I confess I hadn’t even thought about this. Because our AI model marketplace at Volant AI isn’t even live yet, I was saved from writing a longer (likely lacking!) response. The more I read about it though, the more I believed I should write something, especially for people not familiar with this like myself.
So, Chase, thanks for the question and here you go.
Let’s dive in.
The Basics of Market Liquidity
Before we jump into the relevance of market liquidity for our AI model marketplace at Volant AI, it’s probably wise to give a bit of a primer into market liquidity. Here’s a few definitions we found online:
From Investopedia:
Liquidity refers to the efficiency or ease with which an asset or security can be converted into ready cash without affecting its market price
From IG:
Liquidity describes the extent to which an asset can be bought and sold quickly, and at stable prices
Liquidity demonstrates how many buyers/sellers are interacting in the marketplace as well as the ease of transactions happening. In the stock market, this would generally result in the bid price (what a buyer offers per share) and the ask price (what the seller is willing to accept) being close to each other. Generally, the closer they are to each other (a lower bid-ask spread), the higher volume of trading/selling which lends to higher market liquidity. The common example for an illiquid market is real estate. You can imagine that there is often a large gap between the bid price for a house and its ask price (especially with the cost of such an asset). There are also drastically less transactions when compared to a stock market.
In an (unfairly) condensed summary, high market liquidity means higher volumes of trades/transactions. There is generally less risk, a lower bid-ask spread and high market participation.
Relevance For Volant AI
We can try to apply the concepts of market liquidity to our AI model marketplace. As a caveat, AI models are not typical goods (read more here) and since the economics of it haven’t really been investigated (plus, we’re not live yet!) a lot of this is hypothetical.
At Volant AI, our goal is to capture high performing, crowdsourced models for utility situations that could aid Small and Medium Businesses(SMBs) who don’t have the wherewithal to develop their own. Custom AI solutions can cost anywhere from $6000 to $30,000 due to costly dev cycles, compute and the expertise. Make no mistake, this is certainly necessary not only for enterprise, but also for high-fidelity situations.
Let’s apply this concept to Volant AI. Given our mission, we speculate that our bid-offer spread for a model will be largely favorable towards the buyer. Buyers should be more willing to spend money on multiple models, even multiple of a similar use-case (imagine 5 image classification models from different sellers), because we will drive our market standard to be such that models are sold in the $100-$1000 range. It seems absurd, given AI model costs and we expect that some sellers may not take too kindly to this at first (some models will certainly be outside of this price range). Our hope is that this will lead sellers to vertical-ize more (e.g. build models with higher relevance+robustness) so they can sell and surpass their margins. In this way, we will be be able to adjust the bid-ask spread to be closer — perhaps psychologically as well as practically — and not so negative against the seller. An average AI model should have multiple sells and our marketplace should have high market liquidity.
But…
At the moment, this is all theory. As we’ve mentioned throughout, AI models are not typical goods.
Our goal, with our Volant AI model marketplace, is create a highly liquid market. Transactions should not be sporadic. We’d probably track the volume of model transactions (a KPI derived from the stock market) and aim for it to be as high as possible.
Here’s the kicker: what is a good volume of model transactions? Since AI models are unique objects (for so many different reasons), maybe a volume like 1000 or even a 100 transactions a day is sufficient. It will be pretty hard to reconcile what revenue (from the cut of model transactions) we’d need for Volant AI to do well and what a highly liquid AI model marketplace could mean.
Best thing to do for you? Keep up-to-date with us and follow our LinkedIn, Twitter and Facebook pages. And if you want to monetize your AI skills or want access to the coming AI models in our marketplace…
As always, feel free to share your thoughts by dropping a comment!
See our previous articles introducing our platform, discussing sellers and the factors driving the buying of models.
