vs. Sidecar
Uber
Marketplace network effect (city density)
- What it did
- Pickups under five minutes in dense cities; drivers follow riders to the bigger network
- Sidecar
- Outside San Francisco drivers got a ride every hour or two and left
Marketplace network effects
What are Marketplace network effects?
More relevant buyers and sellers improve transaction opportunities for each other.
How Marketplace network effects work
Measure matching outcomes in the relevant local or specialist market. Total registered users can increase while the useful pool for a particular transaction remains unchanged.
How companies won with Marketplace network effects
From the win chains in Strategy Canon case studies: what the winner did, and what its rival did at the same step.
vs. HomeAway · 2012-24
Airbnb
Two-sided liquidity with guests arriving direct
- What it did
- U.S. sales level with HomeAway 2012-14, then twelvefold growth 2013-18
- HomeAway
- Still led U.S. resort markets (2016); per-booking fees added late (10% option Oct 2013; 5-9% traveler fee 2016) angered owners
vs. Monster · 2011–16
Network effect: members keep profiles because recruiters search them; recruiters pay because members are there
- What it did
- Hiring Solutions $84.9M, +136% a year, against Monster's $250M at +2% (Q4 2011)
- Monster
- Folded BeKnown into the job board to show seekers Facebook connections (May 2012)
vs. Barnes & Noble · 1999–2018
Amazon
Open the catalog to outside sellers
- What it did
- Auctions and zShops failed, then Marketplace put sellers on the same product pages: third-party share of units sold rose from 3% (1999) to 17% (2002) to 58% (2018), from more than two million sellers
- Barnes & Noble
- bn.com stayed a books-and-media retailer adding used and out-of-print titles
The question to ask of a company
Does adding participants improve fill rates, match quality or time to transact in the same market? Where does that improvement flatten?
Who names it
| Author | What they call it / where it appears |
|---|---|
| Neumann | A Taxonomy of Moats — Marketplace liquidity |
Note. The diagnostic and scenario are Strategy Canon’s analytical application. Test the firm’s benefit and exclusion mechanism separately; this category alone does not establish Power.