Dan Hockenmaier: prediction

Transcript context

…That makes sense. Basically, how much value are you bringing to this market? And if it's not enough where you can charge anything meaningful to run a business is just not going to work. And so that's a really good way of framing it. Final question around marketplaces and, broadly, and I'll let you go. You've spent a lot of time on marketplaces. You've seen their evolution. You've worked on this maybe for the past decade. Where do you see the future of marketplaces going? I actually wrote a blog post on this where we charted the commission that a marketplace charges and the year they were founded. And if you put those on the x and y axis, there's this very clear up into the right trend. Newer marketplaces are charging higher commissions and they're doing more work to justify those commissions. So broadly the evolution looks like kind of Marketplace 1.0, which is all they're doing is aggregating demand. So that's Zillow and Home Advisor. They're basically like lead gen and their commission rate is often pretty low. It's like 5%, maybe 10%. Then you have a managed marketplace like Airbnb or Etsy, which did something really fundamental on top of that, which is generated trust. So they deadhead supply ... You could probably tell me more about what Airbnb did in this space, but they made it a safe transaction and there's a lot of work it takes to make that transaction trustworthy and safe and so they charge a higher commission as a result. There's then one click beyond that which, for lack of a better term, you could call it a heavily managed marketplace, but now they're typically doing some work in the value chain, which is distinct from just aggregating demand. So DoorDash and Instacart own logistics. They took over logistics and, as a result, DoorDash did a much better job than the previous model of Seamless of being able to bring on a lot more restaurants and make it much more reliable for the customer. As a result, they could charge more to the restaurant. Similarly, Faire, we actually underwrite the transaction. We take the risk. If that transaction falls through or the retailer defaults, Faire eats that. And so we are playing a much more fundamental place in that transaction. But as you play this out, what happens at the end of this continuum? Ultimately, you're charging a hundred percent commission and you're not a marketplace anymore. So I think, as we think about the future of marketplaces, one important question is which marketplaces are going to tend towards evolving out of the marketplace model altogether and which will stay in marketplace mode in equilibrium? And you see these examples already like people talk about Opendoor as a marketplace, but it's not. It's an e-commerce website which has the highest price points you can imagine because you're buying houses, but there's no supplier on the other side. They've already bought the house so it's just e-commerce. And I think many marketplaces will go that way. And I think the variable to me that matters in deciding which case you're going to have, whether they consolidate or not, is how much creativity there is in the space. So how much do you need the supplier to be coming up with interesting new things for your customers to buy. What the customer cares about is actually commoditization. They want the same experience every time. Then you're ultimately going to evolve away from marketplaces I think. s for your customers to buy. What the customer cares about is actually commoditization. They want the same experience every time. Then you're ultimately going to evolve away from marketplaces I think. With ride sharing, basically what I want is a clean car that shows up on time and gets me there every time. So as soon as autonomous vehicles arrive, we're going to fully consolidate that industry and it's not going to be marketplace model any more. On the other end, you have Etsy and Amazon. I think Faire's in this bucket. Steam, the video game marketplace, is in this bucket where the thing you care about is suppliers bringing you amazing creative new things. And that's something that big companies are really bad at doing. So they need the marketplace suppliers to supply this. And so I think those businesses stay in marketplace mode longer term. And then the middle, I don't exactly know how to call what happens in food delivery. You do want some standardization elements, but you also want the local restaurants and so does DoorDash win or the Cloud Kitchen model win? I think it's a little bit harder to understand, but I do think that's kind of the variable that's determining where the future of marketplaces are going.…

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