10 factors to consider while evaluating digital marketplaces
New experience v/s status quo: Great marketplaces do not simply aggregate a market; they enhance it
Economic Advantages vs. the Status Quo:
oDesk enables companies to easily provision programming talent from all corners of the globe.
Another interesting example of this bi-directional advantage is AirBNB. For the property owner, the income is “found money” that simply didn’t exist prior to the marketplace.
Opportunity for Technology to Add Value
High Fragmentation: fragmented supplier base is extremely beneficial
Friction of Supplier Sign-Up: In some markets signing up suppliers is relatively easy. In others, it can be a painfully slow process that requires lots of touch and local presence.
Size of the Market Opportunity: You must combine a TAM analysis with the likelihood of marketplace success and penetration.
Expand the Market: oDesk’s presence increases the number of first time software outsourcers.
Frequency: Another repeated mistake is attacking verticals where a satisfactory supplier “match” end’s the customer’s need to re-enter the market in search of an alternative.
Payment Flow: All things being equal, being part of the payment flow is superior to not being a part of the payment flow. The supplier not only looks to you as a provider of revenue, but they receive that revenue “net of the fee.”
Network Effects: Can the marketplace provide a better experience to customer “n+1000” than it did to customer “n” directly as a function of adding 1000 more participants to the market?
Author: Bill Gurley