I delivered this presentation to second-year MBA students at the Samuel Curtis Johnson Graduate School of Management at Cornell University in 2013. The goal of this presentation was to provide background on the P2P marketplace business model, and apply this to specific industry cases.

1. rishi@rishidean.com
www.rishidean.com
Fundamentals
of
consumer
marketplace
business
models
[
11
factors
to
identify
and
execute
successful
consumer
marketplaces
]
Current Topics in Marketing
(11/26/2013)
FIX
Creating a
consumer
marketplace
Lessons learned
from Sittercity
Rishi Dean
www.sittercity.com

2. Why me?

3. The long, winding road
Currently
Started /
Ground Floor
Advise /
Volunteer
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Dean
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Dean
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That doesn’t make me an “expert”

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Dean
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…only a guide

6. Why this
topic?

7. Your best bet to make $1 billion
~20 years of consumer internet
24 public companies >$1B x 2 for acquisitions
~2 multi-billion dollar companies / year
2/3 are “marketplace” businesses Source: James
Slavet, Greylock
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Dean
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www.rishidean.com
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8. Why now?

9. Our economy is
fundamentally
shifting
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Dean
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10. P2P marketplaces can reduce “economic
slackness” (unemployment)
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Dean
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11. Today…
Intro & academic underpinnings
Keys to building P2P marketplaces
Sittercity case
Presentations / Feedback / Epilogue
1
2
3
4
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Dean
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12. Marketplaces are
the foundation of
the internet
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Dean
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Dean
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14. The internet makes markets efficient
Examples
Dating Match.com, eHarmony, okCupid, …
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Dean
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Commerce eBay, Craigslist, Amazon Marketplace, …
Auto Uber, Lyft, RelayRides, …
Child Care Sittercity, Care, …
Custom Goods CustomMade, Etsy, …
Errands TaskRabbit, Zaarly, Exec, …
Travel Airbnb, Expedia, Priceline, …
Skills oDesk, Skillshare, …

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Dean
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Not all marketplaces are created equal
Transaction initiator
Buy-side? Sell-side? Combo?
Transacted item
Product? Service? Commodity?
Market scope
Horizontal? Vertical? Niche?
Revenue model
Subscription? Transaction?

16. Pipes vs. Platforms?*
Inspired
by:
@sanguit
http://platformed.info/
why-­‐business-­‐models-­‐
fail-­‐pipes-­‐vs-­‐platforms/
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Dean
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Dominant Offline
“Create & push”
B2B / B2C
Dominant Online
“Facilitate interactions”
P2P / B2B

17. Since we’re at school,
let’s look at the theory:
Platform economics
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Dean
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18. 2-sided network incentives
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Dean
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Demand Supply
1) Initial
Adoption
1) Initial
Adoption
2) Same-side
Effects
2) Same-side
Effects
3) Cross-Network Effects
o Why do buyers initially
adopt?
Platform
Phase 1: Initial
Adoption
o Why do sellers initially
adopt?
o How do more buyers
help one another?
Phase 2:
Same-side Effects
o How do more sellers
help one another?
o Increase in liquidity
Phase 3:
Cross-side Effects o Increased liquidity
Strategies for Two-Sided Markets
HBR ARTICLES | Thomas R. Eisenmann, Geoffrey Parker, Marshall W. Van Alstyne | Oct 1, 2006

19. Consumer marketplaces are
special cases of these platforms
Strategies
for
Two-­‐Sided
Markets
HBR
ARTICLES
|
Thomas
R.
Eisenmann,
Geoffrey
Parker,
Marshall
W.
Van
Alstyne
|
Oct
1,
2006
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Dean
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20. …almost every massively
successful tech business
is a platform, many of
those are marketplaces
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Dean
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21. Keys to building
online P2P
marketplaces
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1) Industry Selection
Putting the odds in your favor

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Characteristics of good industries
Big
Ripe
Plentiful

24. Potential amount transacted via
the platform is large
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Dean
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Addressable customers
Frequency of transaction
Transaction size

25. Markets primed for disruption
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Dean
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Consolidate fragmented
markets
Economic empowerment
Deliver new enhanced
experiences

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“Ownable” network effects
Groups who interact
More users = more value
Scale matters
Can own it

27. 2) Network Initialization
Gaining traction
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Dean
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28. 3 keys of gaining initial traction
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¡ Adoption
¡ Liquidity
¡ Pricing

29. Attract users and provide instant utility
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Dean
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10x value proposition
“Prime the pump”
Lock in scarce supply
Onboarding + Activation

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Liquidity: users can find what
they’re looking for
Substitutes
Price dispersion
Market segmentation
Pricing

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Capture value commensurate with
what you create
Sources of revenue
Side of subsidy
Payment scheme
Output costs

32. 3) Service Design
Sustainability
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33. 3 levers of sustainability
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¡ Control
¡ Scale
¡ Competition

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Control of the customer lifecycle
Intermediate the
transaction
Avoid defection
Repeat behavior
Data cycle

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Scaling up within and across
segments
Markets & segments
New market setup
Low friction vs. leverage
Community-driven

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Creating long-term advantage
Winner take all?
Share or fight for
control?
Threat of envelopment
Switching costs

37. Opportunities
Ahead
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Dean
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Mobile
Follow the customer
Location / Proximity
Immediacy
“Moment of truth”

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High-consideration services
Trust first
Offline first
Reputation
Social graph

40. Takeaway: “Ownable Network Effects”
¡ Backbone of the internet & the most lucrative consumer biz model
¡ 1) Select an attractive industry
§ Big market by expected total transaction volume
§ Ripe for technology-enabled consolidation
§ Plentiful to attain and own the network effect
¡ 2) Gain initial traction
§ Adoption: overcome “chicken & egg”
§ Liquidity: expectation you can find what you’re looking for
§ Pricing: capture value commensurate with what you create, but allow for growth
¡ 3) Protect & grow the platform
§ Control: ensure value across all touch-points of customer lifecycle
§ Scale: Cost-effective expansion into new markets / segments / verticals
§ Competition: Create a “moat” around the castle with high switching costs and lockout
¡ 4) Opportunities ahead
§ Mobile: Always on systems for ad-hoc marketplaces based on proximity & affinity
§ Social / Trust: Unlock high consideration P2P verticals
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Dean
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www.rishidean.com
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41. Rishi
Dean
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Thanks to you
Be safe, have fun!

42. I’m here to help
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Dean
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¡ Email: rishi@rishidean.com
¡ Blog: rishidean.com
¡ Twitter: @rishidean
Sittercity:
¡ Sittercity: sittercity.com
¡ Twitter: @sittercity

43. rishi@rishidean.com
www.rishidean.com
Fundamentals
of
consumer
marketplace
business
models
[
11
factors
to
identify
and
execute
successful
consumer
marketplaces
]
Current Topics in Marketing
(11/26/2013)
FIX
Creating a
consumer
marketplace
Lessons learned
from Sittercity
Rishi Dean
www.sittercity.com