GenuineVC David Beisel's Perspective on Digital Change

January 8, 2007

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.

  • http://hitchhiker.blogsome.com/2006/10/01/when-a-marketplace-is-not-a-marketplace-afterall/ will

    http://hitchhiker.blogsome.com/2006/10/01/when-a-marketplace-is-not-a-marketplace-afterall/

    Agree with most of what you said, as someone who founded one of the largest b2b flameouts :)

    Although I would not say that back in 99 all the b2b plays are supplier diven (we were not). And we still did not “fullfill our vision” :) . . .

    The key to succesfull marketplaces lies in 1) participating in the transcation 2) focus on B2C, C2C, or SMB2SMB markets. Large market places for large enterprises simply do not add enough value and requires too much technical intergration to faciliate the transaction.

    The other options is to forgo transactions and become an Ad Network/Search Engine. But ofcourse you better have an answer for Google. (you mentioned classified)

    Essentionally DEEP&FOCUSED (rentacoder) or WIDE&THIN (google) are the two ways to broker a transactions. Any hybrids will be hard to scale.

  • http://basilatlarge.blogspot.com Basil Berntsen

    A marketplace that’s often overlooked is PowerSourceOnline.com- they connect buyers and sellers in the used IT parts market. I used to work there, and they’ve been using web2.0 values (specifically community building) since before the web1.0 crashed :)

  • http://worcester.typepad.com/pc4media peter caputa

    You mean like…

    - Connecting Event Sponsors w/ Event Producers for Sponsorship Opportunities?- Connecting Event Producers w/ Publishers for event advertising?

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