Vertical Marketplaces – Connecting Buyers and Sellers

One type of company largely uncovered in the web 2.0 blogosphere is the emergence of vertical marketplaces – or at least the framing of them that way. Of course, eBay has traditionally been the ultimate marketplace brining buyers and sellers together. And certainly the general online classifieds (like Craigslist), job boards (like Monster), and dating sites (like Match.com) have flourished since the dawn of the internet of “Web 1.0.” But I am beginning to see a set of additional verticals emerging outside these established forums, and it will be interesting to watch how they progress.

There are times when a general classified ad would do, but when a vertically focused connection service will better facilitate a transaction between interested parties. That is, as long as the market is liquid.

It’s amazing to observe the success that a site like Rentacoder has had over the past five years in creating a place for buyers and sellers of contract programming work to connect. Of course, interested parties could use a general-purpose classified site to facilitate the same exchange, but there is something unique about having a marketplace devoted solely to this vertical. Other interesting examples that I would place in this category are the few startups, like ClickForLessons, which are trying to the same thing for an entirely different set of groups – buyers and sellers of private music, dance, singing, acting, and art lessons. It’s also notable that social network for pets, Pawspot, partially differentiates from leader Dogster in promoting the exchange of petsitting services. Additionally, we have had a few companies pitch us at Masthead who are launching or have launched new marketplaces focused on connecting buyers and sellers within companies/organizations in specific industries. (What I am not talking about, however, is creating a set of vertical industrial supplier markets that many tried to approach during the late 90’s with a few resulting players emerged.)

The real opportunity here is in the business model itself – not just providing paid advertising listings (or even contextual relevant advertising adjacent to the listings themselves), but rather actually participating in the transaction as a percentage fee. The more intimate the relationship these marketplaces play in the transaction, the greater the value they can capture from it. As Rentacoder has demonstrated, this level of is engagement is possible by assuming the risk of the transaction, which gives both transacting parties the comfort in “paying” for the introductory services in a substantial manner.

Just as it looks like the all-purpose job sites are having trouble recently competing vs. niche sites (as paidContent and Businessweek report), perhaps there is a real opportunity for specialized vertical matching of buyers/sellers as well. Rather than just connecting for the sake of connecting, I think one evolution of the social networking space (and especially one towards monetization) will focus on these types of connections. Rumor has it that MySpace is already doing very well with its classifieds, but I hypothesize that more focused solutions (many from startups) will also make an significant impact in the future.

David Beisel

David Beisel is a co-founder and Partner at NextView Ventures. He has been focused on early stage Internet startups his entire career, both as an entrepreneur and venture capitalist. As an investor in the digital media space, David was most recently a Vice President at Venrock and previously a Principal at Masthead Venture Partners. Prior to becoming a venture capitalist, David co-founded Sombasa Media, an e-mail marketing company best known for its flagship product BargainDog. Sombasa was successfully acquired by About.com where David served as Vice President of Marketing. David holds an MBA from the Stanford Graduate School of Business and an AB in Economics, magna cum laude and Phi Beta Kappa, from Duke University. He also founded and leads the Boston Innovators Group, an organization which holds quarterly entrepreneur events drawing a thousand attendees.

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