Paving The Way To Marketplace Liquidity

Starting and Scaling Marketplaces with Eventbrite VP & GM Brian Rothenberg and Greylock Growth Advisor Casey Winters

Building an enduring marketplace is a near impossible feat. Marketplace founders are often challenged by the “chicken and egg” problem. How can you create demand for your platform when there is no supply, or vice versa? And then, how do you scale to liquidity, where supply and demand are balanced and transacting at volume? Over the past twenty years we’ve seen the rise of some massive and extremely lucrative marketplaces. Craigslist and eBay took a more decentralized, horizontal approach to the market. In recent years, we’ve seen a shift in marketplace strategy and companies like Airbnb and Uber have centralized operations while attacking a vertical space. Today there seems to be a marketplace for almost every vertical out there.

In our latest podcast, our Growth Advisor in Residence Casey Winters invites Eventbrite VP and GM Brian Rothenberg to riff on starting and scaling marketplaces. Brian has a deep background in marketplaces — he was a PM at Yahoo! for their local marketplaces businesses, founded a local services marketplace called SkillSlate, and served as Taskrabbit’s Co-Head of Marketing before joining Eventbrite as VP of Growth. Before heading growth at Pinterest, Casey ran marketing for Grubhub. The pair dive into marketplace strategies and share how they’ve solved growth and operations problems in their past roles. This podcast is packed with helpful content and examples for anyone starting or working at a marketplace business.

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Below are a few of our favorite excerpts from the conversation. The transcript has been edited for brevity.

The Chicken and Egg Problem

Casey: So, when you think about supply and demand, the classic response people say “Oh, you seed one side. That’s all you gotta do.” What does that actually mean? And then, when you think about which side you need to seed, how do you make that definitive answer?

Brian: More of my experience has been on seeding the supply side of the marketplace, but it can be done both ways. At my own startup, SkillSlate, we tried to hack the supply side. We were trying to roll up the long-tail of local service providers who didn’t have their own websites, and we created what we thought was a novel hack. We crawled the web, looked at classifieds listings advertising their services and then we built structured online profiles for these service providers. And then we effectively invited them to claim their listings that they didn’t even create.

Another approach is something I call the Trojan Horse approach. It’s really about creating a solution for the supply side, like a stand-alone product or service that meets their needs before you even have any demand. One example is Eventbrite. Eventbrite started as a SaaS ticketing platform for event organizers. So, it had utility, even without any ticket buyers that the marketplace is driving for them. It’s a tool to help them manage their business and help them manage ticket sales online. But as you roll up the market, and as you get more and more of these event organizers onto that platform, you create the supply and then you can start to layer on that demand side over time.

Casey: Yeah, I think OpenTable is another classic example of the Trojan Horse. Allowing reservation software for your business and then being able to sell that reservation software, that reservation inventory to people looking for where they can book tonight.

Horizontal vs. Vertical Marketplaces

Casey: How do you think about whether you should start [a marketplace] with something very specific or start with something a little bit more open-ended?

Brian: I feel very conflicted on this question. I initially took to the philosophy that going very vertical, in one local market, makes the most sense to see if you can drive product/market fit. But over time, I’ve seen the opposite work really well too like Thumbtack being the key example. They launched in, I think a thousand categories across the whole United States and they’ve been dramatically more successful than my company was. So I don’t think that there’s a right or wrong approach, but I tend to favor single category versus cross-category. I think for horizontal platforms, you can’t be everything to everyone and so you open yourself up to effectively being disrupted by vertical players over time. So horizontal platforms need to reach some level of scale, unless you’re eventually verticalizing and I think that’s a trend that I’m seeing.

From Online to Offline

Brian: Early on we had Taskrabbits wear the bright green Taskrabbit shirts when they were out doing services and that was a huge awareness drive. Our offline has been huge for Taskrabbit. Another exa- example is Instacart. They have started and stopped at various times having the bags that they give out and I heard that, while you can’t track easily what the impact is, they saw their numbers decline when they stopped including the bags in the deliveries. There’s all this stuff that we can’t measure, but offline can be so powerful.

Casey: Yeah, at Grubhub we had this similar thought process of there’s this journey to an order from a person starting on Google or going and opening the Grubhub app directly to placing an order to 30 to 45 minutes later receiving an order. And as we got more in depth in understanding that journey, it was about, “How can we thoughtfully insert Grubhub into more of that experience than currently exists?” So creating bags, creating a car that’s Grubhub branded, whatever the case may be. And you have to see which of those makes sense and can you actually measure them in an effective way.

Are Marketplaces Winner Take All?

Casey: What plays into who wins in marketplaces in your view and do you agree that they’re usually winner-take-all or winner-take-most or do you think there’s room for lots of players?

Brian: So I think they tend to be winner-take-most, at the very least, if not winner-take-all. I think the driver of that is most marketplaces have cross-side network effects whereby, if all of the demand is there, all of the supply wants to be there and if all the supply is there, all the demand wants to be there. So, it creates this mechanism where both sides tend to grow, which has benefits in that it can lower your customer acquisition costs and increase the amount of revenue you can make per user. And when those dynamics kick in, there’s typically only- only room for one, maybe two players in a given market. It tends to be too hard to catch up and so I think the first person to liquidity (and liquidity ultimately drives those network effects) is the winner, not necessarily the first one to the market.

Casey: Yeah, I agree. I think it’s first to scale in a market, not first to market. And the important word there is also market, right?

Brian: Totally.

Can Craigslist Be Beat?

Casey: In marketplaces, I think we’ve started to see chinks in their armor. What do you think has created that opportunity? What lessons are there for future entrepreneurs around how to tackle an incumbent?

Brian: If you had asked me five years ago, “Could anyone take down Craigslist?” I would’ve said “I really don’t think so,” but I think there’s so much evidence with OfferUp. I just assume something’s working. I have no information to support this other than my own observations, but I think the platform shift to mobile will change things. Eventually a poor enough user experience can wear down consumers over time and if a solution that comes up that is mobile first, or native to the next platform that’s emerging, and maybe that’s enough to take down an incumbent, but I don’t know. I think we’ll see.

Casey: Yeah, I think platform shift is a really interesting thesis. I think for something like Craigslist which has been a much slower mover, it’s created a window for services like OfferUp to compete. But I use OfferUp and I don’t think it’s particularly that much better than Craigslist. But I think it’s enough — it’s actually mobile first which is where the users are that it’s allowed them to grow.