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All Markets Are Not Created Equal: 10 Factors To Consider When Evaluating Digital Marketplaces

Bill Gurley
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Online marketplaces reduce friction for buyers and seller

A successful marketplace must aggregate both supply and demand.  1. New experience: offer a user experience or capability that did not exist before, leading to viral growth 2. Economic advantages: provide cheaper alternative 1. AirBnB: property owners make “found money” income and consumers receive better price 3. Opportunity for technology to add value: abundance of data significantly enhances user experience 4. High fragmentation: less concentrated base of buyer and supplier increases likelihood of success 5. Friction of supplier sign-up: slow process of aggregating supply is a barrier to entry and increases costs 6. Size of market opportunity: support TAM analysis with consideration of marketplace success and penetration 7. Expand the market: expand the market itself by exploring better prices and functionality 8. Frequency: find a market with high utility that consumers use frequently 9. Payment flow: being part of payment flow eases economics 10. Network effects: provide more value and better experience to customers as more join Combine great marketplace characteristics with strong execution to achieve success.

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