Our guide to marketplaces

By Angela, November 12, 2015

At Version One, we love marketplaces. Just look at our portfolio, and you’ll understand how important we think marketplaces are to the future of commerce.

Over the past year, we have focused much of our blog content on helping marketplace founders build their companies. That’s because we realized that while there is a lot of great information for tech startups, not much of it deals specifically with marketplaces. And anyone building a marketplace company knows that marketplaces face unique challenges – including how to solve the chicken and egg problem with supply and demand and how to monetize when services are delivered offline.

To that end, we put together a handbook, A Guide to Marketplaces. It compiles many of the insights we’ve learned from working with great marketplace companies and analyzing the industry.

We hope the handbook helps you in your own journey to break down walls in how goods and services are bought and sold. There’s no single way to build and scale a marketplace, but the book can help you figure out your own path to build supply and spark the virtuous circle of supply and demand.


Download the PDF or ePub version of the handbook and refer to it as you need it.

Lastly, we’d love to hear if you find the content useful. What should we expand on? Did we leave anything out? Please leave a comment below or reach out to us directly.

Happy reading!

Angela and Boris

May 2016 Update:  we summarized this handbook in slide deck form for quick reference which you can access here.

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  • Jing Wu

    This is very informative and such a nice read. Thank you!

  • Brendan Benzing

    Thanks for sharing!!

  • Miranda Nash

    Excellent guide – thank you!! I’d suggest one more marketplace type – C2B. For example, a recruitment marketplace where sellers are individuals (consumers) providing their time and talent to buyers (businesses).

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  • Rathna Sharad

    A fantastic read! Thanks.

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    As a marketplace for private banking services (ynome.com), we at the team here find some absolute truth in this guide. Thanks to Version One for sharing this!!

  • Thank you for a wonderful guide. I really needed this, so I’m so grateful that you took the time and effort to put it together. I was wondering if you could give me some feedback: I’m trying to determine the best review/accountability system for my new peer-to-peer marketplace for children’s learning experiences led by local parents and teachers, Cottageclass.com My problem with five stars is that it seems like an antiquated system that plays into the values we’re opposed to (E.g. grading kids/standardized tests) I was considering upvoting, or using disqus (coupled with a confidential feedback form we can use to inform our teachers and offer special status to particularly exceptional teachers). Right now, I’m leaning towards Facebook comments because it seems like a lot of parents are on Facebook and it would be particularly good for marketing if their testimonials were automatically shared when they commented on a teacher’s class – also so that parents can easily see if their friends have taken a particular class. I’d love your feedback if you have any thoughts on the matter. Thanks so much!

  • bwertz

    Appreciate the feed-back!

  • bwertz

    I would go 2 ways: quantitative feed-back (if you don’t like a 5-star review system, you might go for a simple like / don’t like or recommend / don’t recommend system) and comments for the qualitative feed-back.

  • wonderful. thanks so much! very helpful.

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  • Thank you for this guide to analyze On-demand marketplaces! I think on-demand marketplaces which set pricing are very interesting in high fragmentation market. In our case at http://www.everphotoshoot.com (on demand photographer) we set pricing to have a transparency offer. Instead of a repeat business, we have a virality because people want to share their photos with a great service.

  • Hi Boris and Angela, I just read this again from start to finish. I can’t thank you enough for putting this together. Creating a community marketplace where buyer and sellers grow at a simultaneous rate is indeed a daunting task and it’s really encouraging to listen to you support the patience and consistency and time it takes to make this work, as well as the painstaking attention to “power sellers” I feel really validated after reading through this again!

  • bwertz

    Thanks for re-reading!

  • For a marketplace that is weaker on point 2 on page 9 “Monogamy vs Playing the field” due to customer loyalty to a single provider, would you recommend focusing on fostering loyalty to the marketplace on the seller side? I’d love ideas on ways marketplaces have addressed this weakness effectively.

  • bwertz

    The question is how to keep sellers run their business through your platform – this could be because the platform offers convenience (easy payments, tax management, etc.) but needs to go hand in hand with a low fee (especially relative to the fee you would charge for introducing a new customer).

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  • Thank you for sharing this, its so good we had to make it a mandatory read for all our team members 🙂

    Not to come across as spammy and I realize that saying so does make you look spammy 😉 so I’ll be careful how I phrase this.

    We are working on a horizontal classifieds platform to go head to head with the likes of Craigslist. Not a Clone but something different that scratches the same itch and actually does a bit more…

    The general consensus seems to be that the “un-bundling of Craigslist” into verticals was/is the evolutionary logical next step which is what has started to occur and will continue to happen. With our startup we think differently and I have outlined our arguments to make a case for why “Re-Bundling” might actually be the way to go in the following blog post http://blog.dobox.io/re-bundling-classifieds-craigslist/

    It would mean a lot if you could weigh in on the above and give your feedback, after all you wrote the book on it 😉 Thank you so much

  • bwertz

    History is full on bundling / unbundling cycles so pretty sure we might see a bundling of classifieds at some stage again – thanks for sharing!

  • Michael Supino

    Have had this on my desk as a reference guide for a number of months. Great read. Quick question that I just can’t simply find a clear answer to…does GMV include the fees associated with all those transactions? It would seem you would back it out as leaving in would penalize your take rate by making GMV that much higher, but the total value of the transaction usually includes fees when making a purchase by the end consumer. If it is simply the value of the products passing through the marketplace, then I imagine the original ‘listing’ value is what we should use to calculate GMV prior to including our fee. Any thoughts appreciated!

  • bwertz

    Thanks, Michael – yes, calculate the GMV based on listing value (but have seen some marketplaces include shipping costs in the calculation which is too aggressive imo)

  • Michael Supino

    Perfect. Thanks for your reply Boris.

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  • Jason

    Thanks for sharing. For a lead gen marketplace like Thumbtack how would GMV be computed since they don’t know the final transaction value of the service and don’t necessarily know which service provider has been hired?

  • bwertz

    Great question! You usually need to rely on estimates in such a case (e.g. asking the vendors how many of the leads converted)

  • Thanks for this information! I am struggling with something. I’ve recently launched a marketplace where the buyers are sellers are both looking for each other. I understand that with Airbnb, the travelers are searching for hosts/spaces and that hosts would love it if they can search the travelers too. But the difference is that with Airbnb, only the hosts benefit financially. What if their transaction is mutually financially beneficial?

    What would be your advice to Airbnb if, hypothetically, all travelers made money from renting space? Airbnb promotes finding spaces and hosting spaces. What if they have the ability to also find travelers who are looking for space?

    Would you recommend that they promote “finding spaces” and “finding travelers”? Or stay with their current promotion of “finding spaces” and “hosting spaces”?

    Thanks in advance for your insight…

  • bwertz

    Interesting thought and AirBnB is kind of doing this by doing SEO and investing in paid Google ads and hence trying to get travellers who express interest in a certain location to their site

  • Thank you for your quick response. It makes sense, of course, for Airbnb to do that to increase transactions by attracting more buyers for their sellers. But I’m struggling more about the marketing strategy and not really the advertising strategy.

    I’m contemplating more about the perspective of the marketplace users when they land on the site. Is it okay to simultaneously cater to the users by allowing them to “find spaces” AND “find travelers”?

    I guess it’s confusing because according to “A Guide to Marketplaces”, it is suggested that we concentrate more on the “supply” side. The issue is that the buyers = sellers and demand = supply.

    For example, if it was (hypothetically) possible to target/predict travelers who are definitely using Airbnb, (which means travelers are can also act as supply) then on their website they can promote the following:

    (Assumption: Travelers make money from renting space)
    1. “Find Spaces” and “Host Spaces”
    2. “Find Travelers” and “Become a Traveler”
    3. “Find Spaces” and “Find Travelers”

    Do you think it’s okay to go with option #3? I’m just curious about your insight because I’m not sure.

    Thank you!

  • bwertz

    Not sure I fully understand the question – who would be interested in finding travellers? And why would any traveller post their intention to travel instead of just looking for an accommodation if he / she is already on the site?

  • I understand your confusion since we have found a very unique marketplace in the guest spotting industry where both buyers and sellers mutually financially benefit. I was only using Airbnb since I am sure you were familiar to that marketplace already.

    Please visit http://www.guestspot.co to understand my question…

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  • Tales Porto

    I really like your guide. It’s helping me and mu partners to find the right way of us marketplace(rhases.com.br). Thank you!

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