Events | Previous Events
October 13, 1999 Event
"The eBay of...": Building the Web's Marketplaces of Tomorrow The words "eBay" and "marketplace" have become synonymous at a time when Web marketplaces are flourishing. With a remarkably simple platform, marketplaces such as eBay demonstrate the Web's potential for aggregating buyers and sellers. After centuries of atom-driven marketplaces, bit-driven marketplaces are starting to gain momentum: players such as Inforocket (ideas), Exp.com (services), and Epinions.com (content) are broadening the spectrum of what can be bought and sold. In the end, all successful marketplaces are driven by a select few characteristics, such as liquidity (number of buyers, sellers, and products) and currency (value that exchanges hands). Given this, can these new information and service-based marketplaces ever expect to reach critical mass? Are the dynamics the same for each? While some marketplaces may need to be jumpstarted, others may thrive on vertical-specific demand alone. Addressing these issues may shed some light on whether these emerging marketplaces are yet another fad or the future of commerce. Upstarts tap lucrative services market online
Key Learnings
LIQUIDITY: THE MARKETPLACE'S SECRET SAUCE
Marketplaces, which bring together buyers and sellers for the purpose of exchange, are hailed as the most efficient means to set a price for a good or service. But the secret to marketplace success lies in the constant stream of bid and ask called liquidity. Successful online marketplaces (e.g., eBay) took an already zealous group of traders and catalyzed their trading routines. New marketplaces, however, will not enjoy the ease of success of their online "ancestors." Specialization will be required to create marketplace liquidity and in some cases, startup marketplaces may have to ignite the market by slashing prices or subsidizing sellers in order to jumpstart these opportunities.
THE MONEY IN THE MIDDLE
Once liquidity is achieved in a marketplace, it becomes very difficult for competing marketplaces to succeed. In theory, sellers have little incentive to offer their products in any place but the most buyer-saturated marketplaces. In practice however, information intermediaries such as AuctionWatch.com can pull volume away from larger players. Highly vertical marketplaces that sell cars or financial products can focus their resources and capital to create far more liquid environments than general platforms afford.
DOLLARS DON'T MAKE SENSE IN SERVICES
One of the biggest challenges to new service and idea marketplaces is establishing a competent valuation methodology. Is the service of one accountant worth more than another, and if so, how much more? The difficulties in evaluating value for ideas and services are substantially greater than products. In the product world, the dollar is a clear measurement system. But the value of a service or idea varies substantially from person to person. And unlike products, personal relationships often accompany the exchange of services and ideas. Current Internet players still have a long way to go in solving this problem.
ONLINE SUCCESS FUELED BY LESSONS OFFLINE
Creating revolutionary new marketplaces on the Web seems to have become a daily occurrence as 1999 comes to a close. Yet most of these new business models require consumers to alter their behavior drastically from their offline marketplace correlates. While many will create the eBays of _____, those marketplaces that cater to the core behavioral nuances of users offline may best be positioned for success in the online world.
QUOTES OF THE NIGHT
"Auctions don't create the best deals for customers -- they create the best prices for items in demand."
"What you've got is a bunch of VCs and MBA students enamored with the eBay business model trying to apply it to every conceivable vertical."