Six months ago, we published A Guide to Marketplaces. Marketplace companies comprise an important part…
Marketplaces / Social / Collaboration / Network Effects
In a recent Invest Like The Best podcast, the guest, who goes by the pseudonym Modest Proposal, described a 2×2 matrix for segmenting marketplace types. It’s a simple, yet very effective way to think about the differences in online marketplaces, from the original product marketplaces like eBay to the emerging services marketplaces. One axis represents […]
Six months ago, we published A Guide to Marketplaces. Marketplace companies comprise an important part…
Nearly two years ago, we published our first ebook, A Guide to Marketplaces. Towards the…
In a recent Invest Like The Best podcast, the guest, who goes by the pseudonym Modest Proposal, described a 2×2 matrix for segmenting marketplace types. It’s a simple, yet very effective way to think about the differences in online marketplaces, from the original product marketplaces like eBay to the emerging services marketplaces. One axis represents products or services, and the other axis represents homogenous or heterogenous.
Here’s our take on a marketplace matrix with some key examples for each quadrant.
Product/heterogenous:
This is the original marketplace category. These platforms bring together buyers and sellers of unique goods, reducing friction and unlocking value by breaking down geographic barriers. Buyers and sellers are no longer limited to their local pool: a buyer can find a specific item from a seller halfway across the world and vice versa.
Key characteristics:
Product/homogenous:
These marketplaces sell commoditized products, from diapers and paper towels to USB cables. Customers may develop preferences for one brand over another, but there’s nothing particularly unique or exclusive about the inventory.
Key characteristics:
Services/homogeneous:
A services marketplace has often some kind of physical nexus, where something (the service) is performed offline. Marketplaces in this quadrant offer standard well-described tasks that get further commoditized by platform rules and the user interface. For example, with ride sharing services, consumers care about getting from point A to point B – they don’t particularly care who picks them up, the type of car, etc.
Key characteristics:
Services/heterogeneous:
These platforms match buyers and providers for more complex, non-commoditized services, such as home services. Services are delivered offline and can’t typically be represented in a single easy-to-order SKU. As a result, it’s hard for these marketplaces to be part of the transaction and typically rely on lead generation for their business model.
Key characteristics:
By categorizing marketplaces into a matrix, it’s clear that each type has a unique set of challenges, success factors, and opportunities. It’s impossible to appreciate the power of network effects, for example, without understanding the frequency and commoditization of the underlying product or service. And if you’re interested in exploring any of these topics in more detail, we recently published the third edition of A Guide to Marketplaces.
Data / AI / ML
This November marks three years since the launch of ChatGPT. That moment brought AI into the mainstream, with large language models (LLMs) seen as the breakthrough technology powering it. Since then, innovation in AI has been relentless — perhaps one of the fastest cycles we’ve ever witnessed in tech. It’s worth pausing to reflect on […]
It’s hard to believe that it has been three years since my first day at…
“It takes 10 years and $30m to become a great investor.” This quote has stuck…