Marketplaces are powerful things. Some of the world’s most successful businesses have been built coordinating supply and demand. Southeby’s may be the oldest today, dating back to 1744, but the internet has led to a cambrian explosion in the number of companies that allow buyers and sellers to come together: eBay, Airbnb, Lyft, Etsy, Upwork, Lendingclub, DogVacay, and the list goes on and on.
But the nature of marketplaces seems to be changing a bit. In the early days of the internet, marketplace companies often served as virtual bazaars. Sellers would create profiles and list products while buyers would come and search for their desired wares. They’d both select their products and their sellers. I would characterize these as “active” marketplaces. In other words, marketplaces where participants take active roles in the coordination of commerce.
Today, however, marketplaces are doing more than facilitating commerce. Namely, they’re streamlining experiences. This streamlining of experiences is not surprising. Every day, we generate 2.5 Quintillion bytes of data. It’s constantly growing. In fact, it’s growing so fast that more data has been generated in the last 2 years than over the course of the rest of human history combined. And all that data can be used for optimization. It can be optimizing the price of a product (as Uber does with surge pricing). It can be optimizing the professional selected to service your needs (as Handy does based on available schedules). It could be optimizing the workflow for suppliers (as Crunchbutton does to bring on-demand delivery to suburban markets).
The new marketplaces offer buyers and sellers the same access to commerce as their forebearers but rely on either algorithmic coordination of activity or business model tricks that help abstract away complexity. Instead of actively searching out the right person to provide you with a good or the right person to sell to, that layer of coordination is automated. These marketplaces become far more passive for participants. Instead of thinking, you simply push a button on your phone, beam a signal into the ether, and wait to receive your instructions; “Wait on that corner,” “Pick up this package,” or “Translate this document.”
If nothing else, the transition makes sense. As a species, we relish convenience. Layer any friction into the process of getting something you want, and you might no longer feel that the proverbial “juice is worth the squeeze.” While the early internet enabled coordination at any level, today’s marketplaces enter the fray to streamline that coordination.
As these passive marketplaces emerge and reduce the complexity associated with using a given service, they are also starting to disrupt many existing players. Etsy’s optimized tools for small merchants may not provide access to a marketplace the size of eBay’s, but they are easy enough to use to capture many former eBay sellers. 99designs doesn’t provide the variety of services that can be obtained on Upwork, but it’s a much easier way of finding a design you want than going back and forth with a potential service provider before accepting a bid. And Postmates may only do a subset of what Taskrabbit used to provide, but the fact that I don’t need to coordinate the delivery of anything with individuals has me leveraging the service far more often.
Over the next decade, I believe we’ll see this shift continue. Whether it’s passive marketplaces to deliver standardized goods or service marketplaces (like Uber, Postmates, Handy, etc.) or passive marketplaces that streamline the act of getting non-standard goods (99designs, Crunchbutton, etc.), the more the marketplace itself can reduce complexity for buyers and sellers, the better positioned it will be. Certainly, not all transactions will shift from active to passive marketplaces. But my guess is the portion of eCommerce that shifts will be dramatic.After all, we all love convenience.