Dan Hockenmaier: prediction

Transcript context

…This episode is brought to you by Eppo. Eppo is a next generation A/B testing platform built by Airbnb alums for modern growth teams. Companies like Netlify, Contentful and Cameo rely on Eppo to power their experiments. Wherever you work, running experiments is increasingly essential, but there are no commercial tools that integrate with a modern growth team stack. This leads to waste of time building internal tools or trying to run your experiments through a clunky marketing tool. When I was at Airbnb, one of the things that I loved about our experimentation platform was being able to easily slice results by device, by country, and by user stage. Eppo does all that and more delivering results quickly, avoiding annoying prolonged analytics cycles and helping you easily get to the root cause of any issue you discover. Eppo lets you go beyond basic click through metrics and instead use your north star metrics like activation, retention, subscriptions and payments. And Eppo supports tests on the front end, the back end, email marketing and even machine learning clients. Check out Eppo at geteppo.com, geteppo.com and 10X your experiment velocity. Okay, so we're thinking about marketplaces. One of the biggest questions people ask about marketplaces is how do you know if they're going well? What are health metrics? What are KPIs that you find are most helpful to think about when evaluating the health of a marketplace? I can give you a couple of pretty obvious ones or basic ones and a couple that are a little bit more nuanced. So that in that first bucket, certainly you need to look at some measure of GMV or transactions. You need something that brings together both the supply and demand side to make sure it's working and that's typically your ultimate north star of which everything else ladders up to. I think the second would be a deep understanding of unit economics because the dynamic I talked about where they're hard to get started means that most marketplace in the early days have pretty poor or maybe even negative unit economics. Instacart famously was losing the money on every order. Uber was losing money on every drive. And so I think understanding that and the components that lead up to it is a very important part of understanding your marketable. So those would be the two kind of obvious ones. I think other two that I would look at beyond that, number one is liquidity. And this is a really broad term that people define in a bunch of different ways. The definition I would give is how reliable is the marketplace? If the consumer is looking for something or supplier is looking to sell something, how often can they do that thing that they're trying to do? And ideally you want to express this metric in the form of a dimension or a type of product experience that a customer really cares about. So for Uber or Lyft, wait time is a classic example. As you add more supply, the average wait time for a customer goes down and there's some magic moment around four or five minutes where it really clicks and is now just a much better service than calling a traditional taxi or something else. For a commerce market, typically it's some form of conversion rate or search to fail metrics. So if I go look for this thing on Amazon, how often can I find it and convert? And so by articulating what the customer cares about and where this threshold is, you can tell when you have a liquid marketplace and essentially until you have a liquid marketplace, really nothing else matters. So this should be the primary thing you're focused on defining and then building towards, and this is why you hear a lot of advice to marketplaces to basically cut scope down to a specific geography or a specific category so you can focus on generating liquidity in that area before you can then scale it elsewhere. So this is the number one, I think, metric for a marketplace. And then the last one I'll give is share of wallet. So this is effectively for your buyer, how much of their total spend are you getting on your marketplaces versus the alternatives. For your seller, how much of the business that they're doing is you versus others? So for Uber drivers, if they spend X amount of hours driving per week, how much are you getting versus Lyft or Door Dash or something else? uch of the business that they're doing is you versus others? So for Uber drivers, if they spend X amount of hours driving per week, how much are you getting versus Lyft or Door Dash or something else? For a retailer on Faire, if they're buying to stock their store, how much of the product on their shelf came from Faire versus from somewhere else? These are very important metrics for us to understand. One, for the obvious reason that as it goes up, your LTVs go up and you have a much better business. But probably more importantly than that, the higher it is, the less likely a customer is to multi-tenant, meaning use another marketplace or another service. And ideally you want that customer to commit to using just this marketplace and the higher share of wallet is the more likely that is. But I will say that it's very hard typically to get this to happen on both sides of the marketplace simultaneously. So often you have to pick your leverage point, which one do you think you can actually drive very high share of wallet on.…

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