Tag Archives: marketplaces

What Is Good Retention: An Exhaustive Benchmark Study with Lenny Rachitsky

At the end of 2019, I presented Eventbrite’s product plans to the board for 2020. These plans included a lot of the goals you likely have in your company: improvements in acquisition, activation, and retention. One of our board members asked: “I understand these goals for the year. But long term, how high could we push this retention number? What would great retention be for Eventbrite?”

I actually didn’t have a great answer. Soon after, I was chatting with Lenny Rachitsky, and we decided to embark on a holistic study across the industry to ask “what is great retention?” across business models, customer types, etc. Lenny surveyed a lot of the top practitioners in the industry across a variety of companies, and we’re happy to share the results here. You can see the raw data below, but I recommend reading Lenny’s analysis here. Done? Good.

Why is retention so damn important?
Why are Lenny and I spending so much time researching retention? Because it is the single most important factor in product success. Retention is not only the primary measure of product value and product/market fit for most businesses; it is also the biggest driver of monetization and acquisition as well.

We typically think of monetization as the lifetime value formula, which is how long a user is active along with revenue per active user. Retention has the most impact on how many users are active and lengthens the amount of time they are active. For acquisition, retention is the enabler of the best acquisition strategies. For virality or word of mouth, for example, one of the key factors in any virality formula is how many people can talk about or share your product. The more retained users, the more potential sharers. For content, the more retained users, the more content, the more that content be shared or discovered to attract more users. For paid acquisition or sales, the more retained users, the higher lifetime value, the more you can spend on paid acquisition or sales and still have a comfortable payback period. Retention really is growth’s triple word score.

What are effective ways to increase retention?
Okay, so you understand retention is important and want to improve it. What do you do? Well, at a high level, there are three types of efforts you can pursue to increase retention:

  1. Make the product more valuable: Every product is a bundle of features, and your product may be missing features that get more marginal users to retain better. This is a journey for feature/product fit.
  2. Connect users better to the value of the product that already exists: This is the purpose of a growth team leveraging tactics like onboarding, emails and notifications, and reducing friction in the product where it’s too complex and adding friction when it’s required to connect people to the value.
  3. Create a new product: Struggling to retain users at all? You likely don’t have product/market fit and may need to pivot to a new product.

We discuss these strategies in a lot more depth in the upcoming Product Strategy program coming soon from Reforge, and if you really want a deep dive on retention, we build the Retention & Engagement deep dive.

Why does retention differ so much across categories?
One question you might be asking yourself is why does retention differ so much by different categories? This was the impetus for the initial research, and why I couldn’t give a great answer to our board. Every company has a bunch of different factors that impact retention:

  • Customer type: For example, small businesses fail at a much higher rate than enterprise businesses, so businesses that target small businesses will almost always have lower retention.* This does not make them inferior businesses! They also have many more customers they can acquire.
  • Customer variability: Products that have many different types of customers will typically have lower retention than products that hone in on one type of customer very well.
  • Revenue model: How much money you ask from customers and how can play a big role in retention. For example, a customer may be more likely to retain for a product they marginally like if it costs $30 vs. $300,000. A product that expands revenue per user over time can have lower retention than ones that have a fixed price.
  • Natural frequency: Many products have different natural frequencies. For example, you may only look for a place to live once every few years (like my time at Apartments.com), but you look for something to eat multiple times of day (like my time at Grubhub).
  • Acquisition strategy: The way a company acquires users affects its retention. A wide spread approach to new users may retain worse than carefully targeting users to bring to your product.
  • Network effects: Network effects may drive retention rates up more over time vs. businesses that do not have these effects. For example, all of your friends on Facebook or all of your co-workers on Slack makes it hard to churn from either product whereas churning from Calm or Grammarly is entirely up to you.

* In those businesses, the business failing and churning as a result is called “involuntary churn”, though that can also mean a payment method not working for someone who wants to retain in other models.

BONUS: Why are Casey’s benchmarks for consumer transactional businesses lower than others?

For the demand side of transactional businesses, where the retention graph flattens is more important to me than the six month retention rate. And unlike other models, these businesses can take longer than six months to have their graphs flatten. Also, for marketplaces, one of the two common models along with ecommerce in this category, a healthy demand side retention rate is very dependent on what supply side retention looks like and acquisition costs. For example, since Uber and Lyft have to spend so much time and money acquiring drivers due to a low retention rate, in order for their model to work, demand side retention either has to be high or demand side acquisition has to be low cost. For a business where supply side retention is high and acquisition costs are low, demand side retention can be lower, and the company can still be very successful. Etsy and Wag I imagine fit more into this model.

Currently listening to We All Have An Impact by Boreal Massif.

Sequencing Business Models: Can That SAAS Business Turn Into a Marketplace?

As someone who has spent a lot of time building marketplaces in my career, a curious thing has happened over the last couple years. Founders have started reaching out asking for help converting their SAAS or SAAS-like business into a marketplace. The approach sounds a bit like this:

  • I’ve amassed a large group of X type of professionals
  • I’ve helped their business, but they’re asking for help driving more customers
  • Since I already have the supply, it should be easy to build the demand side to have a successful marketplace
  • My customers will be happy, retain better, and I’ll be able to charge them more

So goes the story. Now, this story itself explains why many businesses fail to make the conversion to marketplace. If driving more customers was your customers’ #1 need, and that’s not what you helped them with, you probably didn’t build a very successful business, or the problem of solving customer acquisition for that market is very difficult.

What Types of Businesses Are We Talking About?

Before we go any further, we should talk about what these businesses look like, and what they mean when they ask about becoming a marketplace. Many of the terms we use to define businesses today are features of the business rather than an encompassing definition, like the words SAAS or platform, which makes them not very useful. Note: I am blatantly stealing Brandon Chu’s platform definitions for this. Let’s break down these definitions so we know where we’re at:

  • SAAS: software that businesses access online and purchase via a subscription e.g. Slack, Adobe, Atlassian
  • SAAS-like: any number of different models where a business sells software to businesses online, but does not charge via a subscription e.g. transactional or pre-revenue
  • Marketplace: a business where sellers (frequently businesses) provide their services on a platform to attract additional buyers, and buyers come to this marketplace to seek out these services and find new suppliers. Marketplaces commonly process the transaction and charge a commission to either the supplier or the demander. If not, they usually charge some sort of lead generation fee to the supplier.
  • Developer platform: a business where developers can build businesses on top of the business’s software and charge customers. The end customer is usually not aware this company even exists e.g. Stripe, Twilio, Amazon Web Services
  • Extension platform: a business that enables other developers to make your product better where the platform owns the relationship with the customer and provides some of the direct value itself e.g. Shopify, WordPress, Salesforce
  • Networks: a type of platform where consumers interact with each other and/or content on the platform in a non-transactional way e.g. LinkedIn, Pinterest, Yelp

So, when we talk about businesses trying to become marketplaces, what we’re talking about usually is sellers of software to businesses trying to help those same businesses attract more buyers by aggregating buyers on their platform and aiding in the discovery of those buyers finding the businesses the company currently counts as customers.

The Weak Transition to Marketplace Arguments

Why is there a sudden demand of founders looking at this strategy? There are three fairly weak arguments I don’t like, but I’ll present them anyway.

#1 Saturated Growth in SAAS

Perhaps it is a natural extension of the SAAS explosion the last ten years. Kevin Kwok and I have often discussed that growth at some scale equals an adjacent business model:

  • Ecommerce businesses trend towards marketplaces over time e.g. Amazon
  • Marketplaces trend towards vertical integration over time e.g. Zillow
  • SAAS businesses trend towards extension platforms e.g. Salesforce

Perhaps as SAAS has moved into more niche verticals, the extension platform opportunities have dried up, so companies are looking at consumer marketplaces as a new potential growth lever. But SAAS companies continue to grow on the public markets. Perhaps as SAAS has expanded into industries where customer acquisition is difficult, they’ve found their businesses at best only solve the second most important problem for their customers.

#2 Desire for Market Networks

Perhaps it’s because of James Currier. He has blogged repeatedly about market networks being the companies of the future. These companies combine SAAS, marketplaces, and networks. But these founders are not using this term, and this supposed revolution looks no closer to happening five years after his original prediction. Some businesses attempting to build out market networks have become good SAAS businesses e.g. Outdoorsy with its Wheelbase product, but there is no evidence they’ve actually ended up building marketplaces or market networks. Honeybook has struggled, and Angellist and Houzz started as networks, not SAAS businesses. Angellist has never added a SAAS component. Houzz acquired IvyMark last year to launch a SAAS model after ecommerce, ads, and marketplace models for monetization disappointed, and it is too early to understand how well that is working. All evidence shows that if market networks are real, they are more likely to become them from starting as a marketplace or network first, then adding SAAS, not the other way around. Faire is a recent example of this.

#3 It Worked for OpenTable

Now this is a reason I actually hear. But it’s not a great one. The first reason is that OpenTable was a marketplace from day one. Customer acquisition was always a key value proposition, and they delivered on it. It wasn’t aspirational. Second, OpenTable is one of the largest public market disappointments of the last ten years. With an infinitely sized market, the company struggled, was acquired, and then written down significantly post-acquisition by Booking.com.

While these stories exist and do influence some founders, I do still think the main reason why is illustrated in the initial story above; it’s just the strange allure of ongoing customer development.

Why Changing Business Models and Customers is Always Hard

Ignoring the impetus for the rapid increase in desire for SAAS businesses to transform into marketplaces, let’s talk about why companies struggle to do this in practice, and how you fight these headwinds. Through my research and directly working with companies attempting these changes, I’ve identified some main barriers for this transition. If you can work through these barriers, your chances of making this mythical transition increase dramatically.

#1 Founders have to change the incentive structure for all or a significant percentage of the company

SAAS or SAAS-like businesses can grow very quickly. If you’ve spent a significant amount of years building a SAAS business and are considering the marketplace transition to drive additional growth and value to your customers, you’ve almost assuredly built a significantly large base of customers, still have growth targets on this core business, and are managing a lot of complexity already. What happens frequently is founders attempt to spin up a team to work on what’s usually a large, new addition to their current product offering. This initiative is considered a long term, strategic play. It’s important, but not urgent.

What happens to important, but not urgent, initiatives at fast growing companies? They usually get broken up by other important, but more urgent initiatives for the core business. Oh, our quarter was soft, and we need more resources to get back on track? Take them from the marketplace team. We’ll get back to it later. Have an initiative that could drive additional growth in the core business, but don’t have the resources? Take them from the marketplace team. We’ll get back to it later. And so on.

It’s always more attractive to take the more guaranteed optimization on the core business than risk those resources for the very long term, completely risky proposition that might drive a step change in growth for the business much later.

Fortunately, this issue is not new to fast growing companies, and there is a solution. In fact, we faced this very issue at Pinterest. Our largest strategic issue was international growth, but employees kept optimizing 1-2% changes in the U.S. business that moved the top line instead of international work that needed to begin from scratch. Founders usually have two tools to solve this problem. The first is to make the entire company’s growth revolve around this new initiative. That’s what Ben Silbermann did at Pinterest. The entire company was goaled on international growth at the expense of U.S. growth. And it worked.

The other tool is what usually happens at larger companies looking to expand into new product lines. They create a new team with separate goals and reporting lines. Frequently, they don’t even sit in the same building. This is what we did at Eventbrite. We created a Marketplace business unit with a GM reporting directly to the CEO. And while they sat in the same building, it had its own team and its own OKRs.

Changing the goals or creating an independent team with its own set of OKRs does not guarantee marketplace success, but they free you from the temptation of dismantling or impacting teams that frequently need to do years’ worth of work to find product/market fit for a second set of customers.

#2 Founders have to shepherd the right new and existing resources most likely to value the business model transition and change the company culture

Strong businesses usually build a culture of understanding their customers and their model very well and catering to those needs. What happens when you suddenly ask those employees to care about a second customer, or a new business model, and potentially trade off the needs? Old habits die hard. Employees still default to doing what’s best for the current customer/business model even at the expense of the new customer. And even if they do want to care about the new type of customer, they may not have the DNA. Consumer and B2B cultures tend to be very different, for example, attract different types of talent, and there are very few people who are great at both. 

Building B2B products can be very different from building consumer products, and many marketplaces (but not all) have consumers on the demand side. In this case, your customer is a less reliable narrator for their needs, so user research, while effective at identifying their problems, can be a lot less reliable at predicting what people will actually use. Consumer products require significantly more experimentation, and have the data to do it because there are so many more consumers than businesses. 

This cultural issue frequently requires new blood in the organization and careful recruitment of internal resources that are more passionate about the opportunity and usually have some background in consumer product development. Usually, leaders are brought in to lead teams like this with heavy consumer backgrounds, and they recruit more new people with consumer backgrounds. The use of advisors with that kind of experience (like myself) is also common—to suggest product development best practices that may be better suited for the task, to prevent common marketplace-building mistakes, and to more objectively monitor if progress is occurring at the appropriate rate.

How to Be Better Positioned to Build a Marketplace

While transitioning to new customers and/or business models and described above is hard, there are a few ways to make the transition to a marketplace more likely to be successful from a SAAS-like business.

#1 Founders need to confirm there is a demand side to this market, and the way you would engage with them aligns to you and your customers’ business models

One major reason marketplace transitions fail is that there isn’t actually a demand side to this theoretical marketplace to be added. These companies are selling to the supply side of a theoretical marketplace, and don’t understand if demand exists. There are two shades of this I have seen. One is that the SAAS customers make their revenue not by selling something people want to buy and find more, but that people feel compelled to support financially. Let’s take GoFundMe or Patreon as an example. These companies would love to have consumers come to their websites and find people and causes to support. Patreon even tried this. But are consumers searching for websites where they can donate more of their money to artists and local causes? No, not really. Do they support artists and local causes? Of course, that’s why those businesses have done well. But consumers generally aren’t searching for more causes.

The second shade is that the marketplace opportunity is only to find a vendor once on the demand side. In these markets, once a consumer finds a provider for a service, they tend to stick with them for long periods of time. Let’s say you are looking for a babysitter. If you find one that works for you, you stick with that person for a long time. This is in contrast to ordering food, where variety is a feature, not a bug, of the decision-making process. While successful marketplaces have been built in these areas, they are harder to build. SAAS companies struggle to transition in these markets because they have to build trust signals that may damage their relationships with their clients, and there are generally better platforms for researching these vendors than on the SAAS platform e.g. Yelp for local restaurants and services, Tripadvisor for hotels, and G2 Crowd for software. Also, how should the SAAS tool price these additional customers? Just once for the acquisition, or every time they use the product in the future? The clients and the company will usually be misaligned on this, creating leakage. In this case, the business model for the marketplace doesn’t align with the business model for the SAAS business or the SAAS customer. In a weird way, by trying to address the biggest problem you heard from your customers, you built a product that doesn’t work for that need, but for your own.

Again, this is a solvable issue. It can be mitigated through a lot of customer research on the demand side. Not only understanding the consumer your clients are targeting, but finding a critical pain point for them that isn’t solved on the market by another product that your company can actually solve due to its relationships with all of the suppliers in the market. Then, try to align revenue to the value you create in a way your SAAS customers will understand. And be prepared not to capture all of the value.

#2 Make sure the opportunity actually aligns to the characteristics of other successful marketplaces

Transitioning to a marketplace effectively requires founders to understand what makes a successful marketplace, and those characteristics are surprisingly opaque to people who haven’t worked on marketplaces. Rather than reinvent the wheel, I encourage founders to read Bill Gurley’s treatise on 10 factors to consider for marketplaces. One other factor Bill neglects to mention that is important is that normally marketplaces are built on top of under-utilized fixed assets:

  • Excess kitchen space for Grubhub
  • Idle cars for Uber/Lyft and Getaround/Turo
  • Empty bedrooms for Airbnb
  • Empty land for Hipcamp
  • Empty hotel rooms for Booking.com/Expedia
  • Excess SMB Inventory for Groupon

Do your current customers have this characteristic?

Can the Transition to Marketplace Ever Work?

It’s clear that evolving a SAAS business to a marketplace is an emerging strategy that more and more founders will research. What is important is to make sure you’re doing it for the right reasons, and that you’re prepared to fight the main barriers that prevent this transition from working. It’s also important to remember that even if you fight these barriers, this transition takes time. Marketplaces tend to take 2-3 years to find product/market fit. You need to be in a position where you can invest for that long before seeing a return.

In the Advanced Growth Strategy course, Kevin and I talk a lot about minimum scope. Minimum scope is the activation energy that makes a strategy viable. In the course, we talk about the minimum scope for cross side network effects to emerge. And in our examples, we do show that most cross side networks (but not all) emerge with the supply side first. But you have to remember that you do have to hit minimum scope for the demand side as well. And many businesses find they do not have a good answer for this.

Another existential issue for founders looking at this transition is that it inverts the typical company building model. When building a company (especially if you are raising venture), you typically have different assumptions you have to validate to receive funding rounds and eventually build a successful, long-term business. The harder the assumption you validate, the more likely you are to be successful, and the easier a fund raise will be. Ask any founder whether building a SAAS business or a marketplace business is harder. I bet you almost all will answer that a marketplace is harder. With the SAAS to marketplace strategy, you defer the hardest part of your strategy.

When looking for inspiration, it’s true there isn’t a cohort of companies to emulate, and that’s scary. In fact, almost every other business model transition related to this has more data to support. Flexport started as a SAAS business from the demand side (called ImportGenius), and built a marketplace on top of it, for example. Almost all marketplaces add a SAAS component eventually to their model. But don’t be too scared if this is your strategy. If you can answer positively:

  • Can I change the culture?
  • Can I change the structure?
  • Have I vetted a demand side exists?
  • Does the demand side actually exhibit great marketplace characteristics?

Then you are off to a great start in building a new scalable model of growth for your business.

Have transition to marketplace questions? If so, hit me up in the comments.

Thanks to Kevin Kwok and Gemma Pollard for giving feedback on this post. Also thanks for Brandon Chu for letting me use his platform definitions.

Currently listening to my 2010s Shortlist playlist.

Centralization Vs. Decentralization in Marketplaces and Scaling Companies

First off, no, this is not a post about blockchain. Sorry to disappoint you. This is a post about structuring your teams, and structuring your business. A common problem I work with entrepreneurs on is where power should be held both inside and outside organizations. These entrepreneurs have heard the stories of how instrumental Uber’s local teams were in their success. They have also heard about marketplaces that have given all of the power to the supply, and also marketplaces where supply has no power. They struggle to understand for their particular business, how much power am I centralizing in HQ, or how much power am I centralizing inside the company vs. outside it.

These issues usually arise in two areas, which particularly, but not exclusively, affect marketplaces. One is around local expansion. When I enter a city or country, who is in charge of that market’s success? Is it a local GM or someone in HQ? The same questions emerge for satellite development offices and going international. Do I hire local managers? Or do people report into managers in HQ? Who owns a country’s growth? The second issue is around who controls the quality of the service. Do we let the supply side determine their level of service, or do we standardize it across all of our supply? Is there value in standardization or variety of service level?

Advice on these topics usually misses the main factors a company should be considering when making these decisions. That main factor is where does the expertise lie, and what enables the best execution. And both of these can change over time. Uber is a great example. Because of training and car inspections, supply side onboarding had to be decentralized to a GM in each market. And because each market needs to boot from scratch, it generally made sense to give the GM responsibility for the entire market. They could do scrappy things to drive supply and demand acquisition and brute force initial liquidity. Once Uber had initial liquidity in these markets though, it ran into decentralization problems. Uber started to build up world class acquisition teams in HQ that didn’t have full control on how to scale customer acquisition. Local teams were still doing scrappy tests that didn’t scale, and not managing budgets as efficiently. Uber eventually centralized a lot of this work, but most people will probably tell you they did it too late, causing a lot of political strife.

On level of service, however, Uber has always strictly standardized their level of service across markets. Uber is not interested in drivers creating their own style of service. Consistency is a key part of Uber’s offering to passengers. Uber decides if they want to introduce varying levels of service in markets in a standardized way, with Black, X, Pool, etc.

At Grubhub, we started with local responsibility for supply with outside salespeople and HQ (read: me) responsible for demand. The playbooks my team developed to drive demand with SEO, SEM, and offline marketing scaled equally well to new markets as long as we reached enough supply. For supply, we had to build knowledge of the local market, and the best way to do that was boots on the ground. Over time, as we refined our process to determine quality restaurant leads and which neighborhoods mattered, we started centralizing supply with an inside sales team in HQ as well. For market launches, we would paratroop salespeople into a market to get to a certain amount of liquidity, then retreat to inside sales to scale.

For level of service, variety matters a lot for a business like Grubhub because not everyone wants to order the same type of food. There is also demand across different price points, time of day, day of week, etc. Variability in the food from restaurant to restaurant is a feature, not a bug. Grubhub uses ratings from the demand side to determine if a restaurant is below a certain floor of quality it is willing to accept, and if it drops below that, they will remove the restaurant from the service. Where Grubhub has standardized more over time is the delivery experience. Grubhub used to outsource 100% of its deliveries to the restaurant, and now over 20% of orders are delivered by Grubhub couriers. I previously explored the variables in the food delivery space here.

Airbnb has evolved similar to Grubhub. At first, Airbnb let hosts define their level of service and encouraged them to express themselves and figure out their own pricing. As Airbnb grew, it developed a deeper understanding of what Airbnb guests want and what prices will be successful. It is now standardizing those pricing levels and amenities hosts are expected to give. Now, they are not booting hosts off the platform who choose not to adopt these strategies. Instead, they are promoting more aggressively the hosts who have specific designations (at first Instant Book and now Airbnb Plus) with higher rankings in search results and special filters. They expect most hosts will conform over time due to these incentives.

It is unclear if this is the right strategy for Airbnb. While baseline expectations for service are a good thing in hospitality, there is a possibility the service could lose some of the uniqueness that partially made it desirable as an alternative to hotels in the first place. Airbnb’s value propositions that made them grow so quickly were lower cost and more unique inventory (both more unique places to stay as well as in more unique locations like local neighborhoods). It will be interesting to see how professionalizing supply works for them in the long term.

Eventbrite is an interesting example of approaching decentralization. Eventbrite works with event creators, commonly known as promoters. What do event promoters know how to do: promote their event! So Eventbrite partially outsourced demand acquisition to its supply of event creators. Event creators knew how to attract ticket buyers better than Eventbrite did in many cases. As Eventbrite has grown though, it has gotten significantly better at helping event creators sell more tickets. It now has proprietary distribution channels the event creators do not have like its app and website, a strong SEO presence, and distribution partnerships.

Eventbrite also has development offices in many different countries now. When you hire a PM for a particular business unit, do they report to the local office leader, who may not have a product background, but knows what is going on in the office really well and knows how to hire locally? Or does the PM report to a product leader that may not even live in the same country but knows how to develop product managers and understands the product strategy? This was a recent problem we worked on. What we decided is that the PM would have a local leader that is in charge of making sure that PM is a happy and productive member of that local office and a functional leader that is in charge of making sure that PM is a happy and productive member of the business unit and product team.

General Best Practices

Out of these examples some best practices emerge. If you’re thinking about these questions for your business, I would ask the following questions:

Am I launching a new market? If so, how much of a replicable playbook do I have on how to launch successfully?

The earlier the stage of the market you are expanding into and the less of a playbook you have for this, the more likely you want a local owner in charge of figuring out how to make the market work. Their job, however, is not to own the market long term. It is to get to liquidity as fast as possible so that subject matter experts in HQ can take over parts of the growth of the market.

If you have a refined playbook like Grubhub eventually did, you may find you don’t need local expertise for supply or demand.

Once a market has launched, who is in charge of the growth of the market?

Once a market has found liquidity, or product/market fit, it depends on how much of what drives that market’s success is shared with the rest of the company. If the market is fairly unique, a GM with control may make sense. However, most markets have a fairly similar growth playbook once the market finds liquidity. Usually, this means, if a GM exists, they should not own the growth of the market. Instead, they control growth levers that cannot be managed effectively from HQ, such as training and local partnerships and local feedback to HQ teams. They also frequently are an execution layer for HQ strategies such a PR, content marketing, etc. A lot of companies make the mistake of keeping the onus of growth on a local person even after it is revealed most of the levers for growth are controlled by HQ, creating a very frustrating role for that GM.

Is supply variability a feature or a bug?

Does the demand side of your marketplace have homogeneous needs? If so, can you standardize that into different products or not? If not, you will allow your supply more control over what services they provide until needs become more homogenized or are cleanly separated into different products that can be standardized.

Who manages local team members?

If they are operations focused on local needs, they are usually best managed by some sort of operational team. At Pinterest, these team members were managed by a Head of International in HQ. At Grubhub, since all of our local people were salespeople, they were managed by a VP of Sales in HQ. If, however, you have local development teams, those teams have different management needs that typically need to be managed by different people. They need a functional manager that can tie them into the HQ’s strategy. Because of the size of the team though, they also need a local manager that can recruit them and make sure they are a happy and effective local employee that an HQ manager won’t have visibility into. As teams scale, they usually add local management layers that report into functional managers in HQ. For product, for example, that might be a Product Lead in a satellite office reporting into a Director or VP of Product in HQ. If you don’t have enough product managers to have a local manager, they usually dually report into the HQ Head of Product and the satellite office manager.

Most companies centralize decision-making over time in their main office. They do this not because they are hungry for control, but because they start to build up more expertise than either their local offices or their suppliers. It is not actually the leadership team centralizing the decision-making, but the subject matter experts in HQ. The real question to ask when you are managing these problems yourself is where is the expertise for this problem, and is it changing, and how does execution need to occur for this problem.

The Problems With Martech, and Why Martech is Actually for Engineers

Since I spent some time in VC land and have a background in marketing, a lot of people ask me about martech, or technology built for the marketers. Are these good businesses? Which tools should they use/are on the rise?

In short, I hate martech, and think martech will decline as a category, and most martech businesses will not be very successful. I think there are a few reasons for this that are not well understood, but if you understand them, it can unlock some martech opportunities that are still quite large for entrepreneurs, and help marketers understand which technologies to bet on vs. bring in house. The main misunderstanding is that successful martech is actually for engineers, not marketers. Let’s talk about why that’s the case.

Martech is a Response to Engineering Constraints
A controversial opinion I have stated before is that the marketing function in technology companies is usually a response to engineering constraints. If you don’t have enough engineers to build a system to manage bidding for performance marketing, you hire a marketer. If you don’t have engineers that can work on SEO, you hire a marketer. If you can’t build a great email system, you hire a marketer. Most key marketing roles are manual tasks that can better be solved with engineering. The smartest marketers, realizing this, started automating a lot of their work through third party tools, and if they could, even better, first party tools. This is how martech exploded over the last decade. Marketers actually had important, if not critically under-weighted, responsibilities for the company. For example, I was in charge of getting new people to try ordering online at Grubhub, and to keep them coming back once they did. My team used a lot of martech tools to do that.

Engineering Constraints Are Being Laxed
While hiring engineers inside companies to solve these problems is still extremely competitive, engineering constraints are (slowly) being laxed across every technology company I meet. Startups and technology companies today have many more engineers working on more functions (due to improvements on engineering technology) than we had at Grubhub during similar stages of our company.

These engineering constraints being laxed means martech companies have to compete with the engineers at the company for the best way to solve a marketing problem. And besides there being more engineers in a company to work on these problems, engineers are now more likely to want to work on these problems or reject these tools as best practices. Growth teams have emerged to work on a lot of the traditional marketing problems marketing teams bought software for: email, SEO, landing page optimization, onboarding, etc.

Martech now finds itself in a more competitive environment since “build” in the “build or buy” equation is more likely than it used to be. Also, if engineers inside a company do decide to build instead of buy a solution, a lot of times what they build is more effective than what the martech provider can offer. This is not to say engineers inside tech companies are better than engineers inside martech companies; engineers inside tech companies simply have unfair advantages. Not only can engineers building the solution for their company build directly to the needs of their company instead of adapt some generic solution; they can also more easily integrate with the data needed for these tools to make the right decisions. It is notoriously difficult, for example, for many martech tools to integrate conversion data, and certainly much harder for lifetime value data. This is much more easily done with an in-house built tool.

Platforms Also Limit Martech’s Reach
Martech companies face the squeeze from the other side of the integration as well. Usually, martech companies integrate into some other system: advertising companies like Google and Facebook, adtech companies like exchanges and demand side platforms, email service providers and email clients, etc. What happened is these martech companies built value added features on top of a platform to deliver extra value to customers. What is happening now is those platforms are either integrating those best features themselves, so you don’t need the martech company for it anymore, or deleting the access that enables it, because the platform doesn’t actually want that level of transparency.

Where Can Martech Be Successful?
So these companies have the platforms stealing their features or cutting off the access that makes them possible on one side, and engineers at the companies of their clients building deeper integrations themselves. So, if most martech solutions have a disadvantage to competing with in-house engineering solutions, or the platforms starts competing with them, what type of martech tools have an advantage?

Option 1: Leverage Data Network Effects
One key example where martech thrives is when the external data becomes more important than the internal data. If a martech tool can be gathering data from multiple companies, and create a data network effect from this aggregation, thereby helping all companies improve in a way they could not on their own, they are very defensible. Sift Science is a great example of this. By being used as a fraud provider across thousands of companies, they have data any individual company won’t have in determining if a transaction is fraudulent or not.

Option 2: Manage Pain
Similarly, integrations with a bunch of key operators or vendors are very defensible in martech. Litmus is a classic example historically. Email providers have notoriously finicky rules around what renders in their systems and how, and they are not very transparent. Engineers and designers hate coding for email, and it’s hard for them to remember all the rules for all the different types of email clients. Litmus allowed you to preview what your emails looked like across all major clients to spot errors before you send the email, and generally became an all-encompassing email QA tool. No engineer internally wants to build that, and they will never be as good as Litmus at doing it because Litmus has been doing it for billions of emails, so it has seen many more cases, and has better integrations with email providers. Another example of removing engineering pain is Heap Analytics, which auto-tags events, removing one of the most painful parts of setting up a new analytics vendor.

Option 3: Leverage Cross Side Network Effects
A more modern example is the customer data platform companies Segment and mParticle. These companies integrate with hundreds of other companies marketers use for various purposes: web analytics, conversion tracking for performance marketing, crash reporting, et al. Integrating these companies saves engineers time because they integrate once, and any other solutions they need can now be enabled instantly. These integrations not only help marketing, but product, and engineering as well. These companies have created a cross side network effect between customers and other technology providers. Data platform companies are hard to rip out once you integrate because they are so integrated in all of your processes.

The Real Answer: Change the Target Customer
Okay, so all of these are great options, but they actually share one thing in common: they have really shifted the target customer to the engineer instead of the marketer. Sure, the marketer may be the person requesting the solution, but the solution is chosen because the engineers like it. Many things an engineer has to do are painful, and as much as engineers like to solve their own problems, if you show value to them, they will appreciate it. So I am very bullish on engtech companies masquerading as martech. Other examples of this besides the ones above are data visualization platforms like Mode and Periscope.

Bonus Option: Pick the Right Marketing Customer
One other strategy that is very successful for martech companies is to build targeted solutions for the types of companies where marketing is more central to the organization’s success. While marketing is ebbing in importance in most tech companies, one area it is thriving is in ecommerce companies, whose main playbooks are logistical on product delivery, and where brand + performance marketing drive all sales. The product is something delivered offline, so the product and engineering teams are more subservient to marketing than in other functions, and because the product is delivered offline, these teams usually have less engineers than other companies. Narvar is a great example for ecommerce tracking. Buffer is a great example for social media marketing. Canva is a great tool to help design creative for marketing campaigns and social media posts.

Martech is a very challenging space for an entrepreneur. If you are going to tackle it, there are distinct strategies like data network effects, pain management and maintenance, and cross side network effects that make it more possible to build a sustainable business. Approaching the right customers, either in role (engineering) or space (ecommerce) also make the road easier.  If you have any other tips on building a great martech business, feel free to leave them in the comments.

Currently listening to Slide by George Clanton.

Addressing Common Misconceptions about Food Delivery Marketplaces

I spent five and a half years working at Grubhub, from series A to right before IPO. This allowed me to learn about many of the intricacies of the restaurant market and food delivery in general. More people have started to take notice of the market because of a slew of market entrants and Grubhub ($9.1B), Just Eat ($4.8B), and Delivery Hero ($7.2B) being successful on the public markets. With that, more articles in the press. Articles… that are wrong. I am reminded of the Murray Gell-Mann Amnesia Effect, invented by Michael Crichton, when I read these articles. It says:

Briefly stated, the Gell-Mann Amnesia effect is as follows. You open the newspaper to an article on some subject you know well. In Murray’s case, physics. In mine, show business. You read the article and see the journalist has absolutely no understanding of either the facts or the issues. Often, the article is so wrong it actually presents the story backward—reversing cause and effect. I call these the “wet streets cause rain” stories. Paper’s full of them.

In any case, you read with exasperation or amusement the multiple errors in a story, and then turn the page to national or international affairs, and read as if the rest of the newspaper was somehow more accurate about Palestine than the baloney you just read. You turn the page, and forget what you know.

As someone who does know, I want to explain some of these misconceptions, so people don’t think wet streets cause rain (even though rain does cause delivery orders).

Misconception #1: Restaurant Margins
One major gripe journalists cite about food delivery marketplaces (more so UberEats than Grubhub due to its higher fees) is that restaurants operate on slim margins. Therefore, if food delivery marketplaces are charging 15-30% for delivery orders, restaurants are not making any money. The issue is understanding the difference between restaurant margins and delivery margins, which are very different.

Most successful marketplaces are built on top of an under-utilized fixed asset. For food delivery marketplaces, this under-utilized fixed asset is not the restaurant, but the kitchen. Restaurants have a fixed capacity they can seat at a restaurant. The kitchen, however, is usually capable of producing much more food on a daily basis than is needed by the patrons that dine in the restaurants. Restaurants are paying for that kitchen capacity regardless of how much they use because one of the highest costs for most restaurants in cities is the cost of rent. That’s why I thought it was so silly when all of these delivery service startups started making their own food. You’re spending a lot of money to build what the incumbent gets for free: excess kitchen capacity to make food. This is why restaurants love catering orders so much. They get big orders that can better leverage their kitchen capacity. After catering, their next favorite is delivery.

Why delivery? It allows them to serve many more customers at a time with their fixed asset, spreading their fixed costs across many more customers. Catering and delivery are pretty much pure margin for restaurants because their only extra cost is a delivery driver (or not, in many cases) who is subsidized by the people ordering the food via tips.

Misconception #2: Paying for Repeat Orders
The second major gripe I hear about food delivery marketplaces is that they charge the same amount for a customer’s first order to a restaurant and repeat orders. Now, a lot of this is drummed up by a competitor who does not drive demand, so it is biased, but I’ll endear it. The misconception here is that all a restaurant has to do is pay an advertising fee to induce trial, and if the food is good, the customer will order again based on that experience. That is now how food delivery works. Food delivery is very fragmented, and while there is differentiation by way of restaurant quality, there are usually quite a few worthy substitutes. Also, the way delivery orderers usually make decisions is method first, restaurant last. The way the average person decides to use Grubhub operates something like this (flowchart):

Restaurant loyalty is one of the least important and last steps in the process of the person ordering food. This means people ordering food do not have loyalty, and you need to compete for every order as if it’s the first. Google Adwords does not charge Apartments.com less if someone who clicked their ad a year ago when searching “apartments” does so again the following year. The reason they don’t is because if Apartments.com wasn’t showing up there, that user would have gladly clicked the ad for ApartmentGuide. Restaurants should absolutely be working to build loyalty, and some do. But expecting that acquisition was the hard work, and restaurants should only pay a SAAS-level fee for retention does not align to the value these marketplaces actually create for restaurants.

Changes That Do Make Sense
Now, there are some elements I would change in regard to repeat orders if I worked at these marketplaces. While Grubhub already charges a much cheaper rate if the order originates from a restaurant’s own website, there are other forms of orders that the restaurant seemingly drives itself without the marketplace’s marketing engine or aggregation. One is if the person ordering food directly types the restaurant’s name into the marketplace. Charging a lower rate for that makes sense as the restaurant is clearly driving the business. I know from the data that this is a small percentage of orders, but this would show good faith to restaurants that marketplaces want to align their revenue model to the value they create.

Another scenario is if the person lands directly on the restaurant’s page on the marketplace from somewhere else e.g. Google. If this happens organically (because the marketplace ranks high or because the restaurant does not have its own website), the marketplace should charge a lower rate. The reality is Yelp and Google Local take 90% of this traffic, but again, it would send the right message.

The other example of this is a little harder to parse. These marketplaces also bid on restaurant names on Google. If that drives an online order, what should be the charge? The restaurant drove the demand, but the marketplace spent the advertising dollars to close the order. In this case, I think these marketplaces should evolve to asking if restaurants want this type of marketing, and if so, charge for the advertising as a service. This was not possible for Grubhub when I worked there due to game theory issues with all the competitors, but with a shrinking field of credible players, it may be possible.

Four Strategies to Win Big with Low Frequency Marketplaces


Frequency creates habit which creates loyalty which creates profit. Uber and Lyft are successful because consumers need to get from A to B multiple times a day, forming habits that lead to long (and high!) lifetime values. Grubhub similarly benefited from people eating more than once per day.

But there aren’t that many business opportunities that have daily — or even weekly — frequencies. And those spaces have become very competitive. For example, how many food delivery companies can you name? Now add in groceries or meal kit cooking companies. All that just for the “eating” use case.

What if the natural frequency of use for a transactional business is low, like buying a house, selling a car, or booking a trip? How do you create a successful business if ideal frequency is quarterly or yearly or even once every few years? You would be unlikely to create a habit or loyalty, much less get the customer to remember your brand name. That is usually the case. If you don’t create loyalty, then you usually have re-acquire consumers when the need eventually arises again. This hurts customer acquisition costs and lifetime value. This fact makes building a successful business with low frequency extremely difficult.

With a low frequency business, you usually need to have a high average selling price to make up for the lack of frequency. While an order on Grubhub may cost you only $25, the average transaction size on Airbnb is hundreds of dollars. But a high average selling price alone is not enough to become a massively successful business. I’ve seen four distinct strategies for how to thrive in low frequency marketplaces. They all revolve around being top of mind when the transactional need occurs, no matter how infrequent that need is. I’ll start by talking about the most common approach, and then lead into some that are actually more valuable and defensible.

The Expedia Model (AKA SEO)
Companies that pursue this model: Thumbtack, Expedia, Apartments.com, WebMD

My first job was at Apartments.com. We were a classic low frequency marketplace. People search for apartments at most once a year, and there isn’t a whole lot of value you can provide in between apartment searches. So what did we do at Apartments.com? If you do not create habits or loyalty with initial use, users go back to the original way they solved the problem last time. Where do people go where they are searching for help renting an apartment? Usually, Google. So, the Apartments.com strategy was to rank well organically on Google so when people did search again for an apartment, they’d be likely to see us and use us for their search again.

SEO can be a very successful strategy, but the entire company has to be geared around success on Google. This strategy is also susceptible to platform shifts, like Google algorithm changes or Google deciding to compete with you. It also tends to shift companies toward portfolio models at scale. This is why Expedia owns Hotels.com, Orbitz, Hotwire, Travelocity, and Trivago, and why Priceline owns Booking.com and Kayak. When you rank #1 for your main keywords, the only way to grow is to own the #2 and #3 spots as well.

The Airbnb Model (AKA Better, Cheaper)
Companies that pursue this model: Airbnb, Rent The Runway, Poshmark

Sarah Tavel wrote a post about products that are 10x better and cheaper than their alternatives. You can definitely pursue this strategy even if you have low frequency. Airbnb was significantly cheaper than hotels, and many people, once they experienced Airbnb, found it a better experience as well. It was a more unique listing, in a “more real” part of the city, and they had a connection to a local. So, even though people only travel once or twice a year on average, when they do, they remember the Airbnb experience and start there directly instead of on Google, competing with the SEO behemoths of Expedia and Priceline.

Finding this level of differentiation in different industries is not easy, but worth contemplating. Airbnb is not the only startup that has entered a crowded space and grown rapidly by figuring out how to be 10x better and cheaper. RentTheRunway allows you to access high quality fashion without the high price, and without storing it, because dressing up is increasingly a low frequency occurrence.

The HotelTonight Model (AKA Insurance)
Companies that pursue this model: HotelTonight, One Medical, Lifelock, 1Password

There are certain businesses that are needed infrequently, but when they are needed, they are needed with great urgency. Example spaces include urgent care, being stuck in a random city unexpectedly, and fraud alerts. The key here is that someone keeps the app or account live despite a lack of usage because the fear of when it might be needed is so great. This is a hard strategy to pursue, but once the value prop is established, these companies remain sticky despite their lack of frequency.

The Houzz Model (AKA Engagement)
Companies that pursue this model: Houzz, Zillow, CreditKarma

Contrary to what many might think, keeping users engaged in a low frequency business is indeed possible: the key is a non-transactional experience. Many of these approaches have a “set and forget” component to them where they reach out with pertinent information in a more frequent way. Zillow is the first example I can remember that utilized this strategy. Even when not actively looking for houses to buy, Zillow kept users engaged by valuing their existing homes via the zestimates. CreditKarma reaches out with alerts and monthly credit check updates.

Houzz is a great example that is more recent. People remodel and redecorate their homes infrequently, but they are inspired more regularly. Houzz has a great product that shows home inspiration that can be saved and discussed, and when needed, but much more rarely, transacted.This is a product people engage directly with in instead of having to have content pushed to them

For this strategy to work, you essentially build a second product that enables frequent engagement — not a transactional product. Engagement strategies for low frequency marketplaces take advantage of an inherent human desire to stay up-to-date on things important to them. This won’t work for all industries. We actually tried this at Apartments.com, but were not successful because renters don’t care as much about investing in their living situation as homeowners.

A common confusion is that loyalty programs are an example of this. What loyalty programs usually do is increase frequency or target users that have high category frequency, like business travelers in the travel segment, rather than create loyalty from infrequent users. It is still a very valuable strategy, and I have blogged about loyalty programs if you want to learn more.

Of the four models I wrote about above, you will notice that not one of these is a brand model. Many of the sites listed in the SEO model have spent hundreds of millions of dollars building brands. Yet most travel searchers still start with Google. Brand is an extension of the Airbnb model, not its own strategy. If the product doesn’t deliver on a differentiated experience, brand building usually does not create loyalty.

So, if you’re building a low frequency business, do not dismay. There are many paths to still becoming a very large and differentiated business. These strategies are difficult but very rewarding if they are executed well.

Currently listening to Take Me Apart by Kelela.

Starting and Scaling Marketplaces Podcast

Brian Rothenberg, VP & GM at Eventbrite, and I discuss how to start and scale marketplaces. We discuss certain topics such as the chicken and egg problem, going horizontal vs. vertical at the beginning, and traditional and non-traditional growth tactics to grow marketplaces. You can check it out below or read the summary here.

The iTunes link is here, and here is the Soundcloud link for email readers.

The Three Stages of Online Marketplaces

Prior to Pinterest, I worked on two sided network businesses my entire career, for apartment rentals (Apartments.com), real estate (Homefinder.com), and food delivery (GrubHub). As a result, I’ve admittedly become somewhat of a marketplace geek. And today is a very exciting time for online marketplaces. Marketplaces are evolving online. It’s hard to keep up with the innovation, but I’ll describe the three phases I am seeing, and why certain ones may prevail in different industries.

Phase 1: Connect buyers and sellers
This is the basic requirement of a marketplace. Early marketplace businesses like Ebay allowed you find people looking for your service if you were a seller, or find people selling what you were interested in if you were a buyer. To make this work, companies need to get past the chicken and egg scenario and build trust through their network. Things like ratings and reviews and guarantees make buyers trust they would get what they paid for, and sellers knew they would get paid if they delivered the service. Marketplaces in this scenario also had to find a way to get paid, using taking a lead generation or transaction fee for increasing the seller’s volume of sales. This phase is still in use with successful marketplaces like Airbnb, GrubHub, OpenTable, and others, but almost all are desperately trying to migrate into phase two or three right now, as you’ll see in the following paragraphs.

Phase 2: Own the delivery network
More recent marketplaces, not content to just facilitate a transaction, are actually working to implement the transaction by owning the element of bringing the service to the buyer. Marketplaces know that if they don’t control more of the experience, a great experience can be ruined by things outside of their control, supply side fault or not. Startups like Instacart don’t just allow you buy groceries online, but their workers deliver the groceries to you. Postmates and Doordash do the same for delivery food, picking up food from restaurants that don’t deliver and deliver it using their own workers. While this model is not new (restaurant delivery services have been around since before the internet), companies are now trying to build delivery networks at scale.

This is risky, as delivery networks all rely on the same pool of drivers. So, on the delivery side, marketplaces in different industries compete for delivery drivers. In a zero sum game there, it’s most likely the marketplace with the most demand wins (at this point, that’s undoubtedly Uber).

GrubHub, for example, bought two delivery services in Q4. OpenTable is moving into payments at restaurants. Airbnb is working on concierge services to improve the stay of guests. The companies starting in phase 1 see this as owning more of service blueprint, injecting their brand into the blueprint wherever possible.

Phase 3: Own supply
An even newer trend than owning the delivery network for an online marketplace is to vertically integrate the supply side of the business. Now, you may ask, what makes this a marketplace? In reality, it’s not, but from every other element, the business is designed or is mimicking an existing marketplace. Sprig and Spoonrocket do this with food delivery. They are delivery only restaurants that make their own food and have their own delivery drivers. MakeSpace and Boxbee, instead of just building a marketplace to help you find storage space, built their own storage spaces and will pick up your items and deliver them to storage and deliver them back for retrieval if needed. Margins are very different for their businesses.

The question for me becomes how far up the pyramid can you build a successful business. In many cases, owning supply will be victorious, but in many others, owning the delivery network is the best option. In other, a traditional marketplace is the best option. It will be interesting to watch almost every vertical determine the best model for customer satisfaction, scale, and profitability over the next decade.

The Contradictory Nature of Mobile Unbundling and the Emergence of Niche Marketplaces

Two specific, but highly related, points of view are gaining widespread acceptance among venture capitalists in the technology industry. The first is succinctly explained by venture capitalist Albert Wenger in a post called Facebook’s Real Mobile Problem: Unbundling. The gist of the post can be summed up by this comment: “Mobile devices are doing to web services what web services did to print media: they unbundle.” Fellow venture capitalist Andrew Weissman expanded on this idea in a post called The Great Fragmentation. In it, Andrew goes further, arguing that unbundling might be a core feature of the internet.

A second, but related point, is the emergence of the niche marketplace. Venture capitalist Andrew Parker has a post called The Spawn of Craigslist in which he shows how the behemoth marketplace Craigslist is getting slowly disrupted in a vertical-specific way. Venture capitalist Chris Dixon expands on this idea, saying that the only way to be successful as an online marketplace now is to take a vertical-specific approach.

Together, these venture capitalists describe a future in which there is a specific app or specific marketplace for every need a user might have. Instead of going to Craigslist to find an apartment, movers, a maid, a freelance web designer for your home business, a date, and last minute tickets, a mobile user would instead have an app for Padmapper, TaskRabbit, Homejoy, ODesk, HowAboutWe, and WillCall. The key to being a successful venture capitalist then shifts from finding businesses that tackle very large markets e.g. Craigslist to finding businesses that target markets that could be much bigger with unbundling e.g. Airbnb.

All of these VC’s are clearly smarter than me, but I take a somewhat contrarian view here. I hope the above example points out the main problem with this theory. In the above picture, in order for this mobile user to accomplish his/her goals, instead of needing to just know about and have an app for Craigslist, s/he now needs to know about and have apps for six separate businesses. One other thing venture capitalists agree on is that mobile app discovery is hard, and that the amount of apps mobile users will download and use is limited by both device memory as well as human memory. This same problem faces the sellers of services on marketplaces. With no aggregate marketplace, it may be harder for a seller of multiple services to know which ones exist for which product/service they are selling. Marketplaces thrive on a multitude of buyers and sellers. Unbundling of marketplaces makes building that two-sided network harder.

Something has to give here. You can’t have a future where everything is accomplished online via a mobile device, consumer’s preference on mobile is for apps, there will be hundreds of specific services for anything a user needs that are more powerful than aggregate services, app discovery is difficult, and people will only have 41 apps per phone. I think there is some sort of equilibrium here. Even if app discovery is solved (and that’s a hard problem), the rate of successful unbundling certainly seems like it has to be limited by 1) the amount of space on someone’s phone, and 2) user’s inability to be aware of hundreds of niche services they may need at any time. If you think a recommendation engine could solve this with big data, I recommend you read this article about how successful that’s been for other services.

If I had to guess, I would surmise that user unbundling will not be a trend in and of itself, even if it is a trend in technology startups building new businesses. Unbundling will continue when either 1) the frequency of the activity that is being unbundled is high (my standard would be weekly), or 2) the advantage of the unbundling is exponentially more valuable than the bundled version of the same activity. For criterion 2, that advantage will also be a moving target where the advantage has to become greater and greater to justify phone/brain space as more apps improve their utility. Number of apps per phone will continue to grow, but a decreasing rate, and with that growth, there will be a decreasing state of awareness for both apps that are on a user’s phone and ones that are not. If you doubt this, just think of how many websites you visit regularly. Think hard. It isn’t that high, is it? Now think about apps? Even less? Me too.

So, what does this all mean? Well, my take is that high frequency services like chat or picture taking continue to become unbundled from any aggregate services consumers use for them because of the ability of mobile to create superior user experiences for succinct actions. But, marketplaces that aggregate niche activities that users need only occasionally can continue to thrive e.g. eBay and Craigslist. One should expect only a handful of the dozens of services hoping to disrupt Craigslist or eBay or Amazon to survive, because of fantastic user experience or a high frequency of use. Finally, one should not be so quick to anoint the niche marketplace model as the emergence of mobile presents as many limitations to their success as it does opportunities for growth.