The Evolution of Marketplaces

In the early days of the web Craigslist’s horizontal listing based marketplace was all things to all people as speed, simplicity and liquidity were the key success factors in the market. A few vertical competitors emerged in the late 1990s and early 2000s, illustrated by sites like Monster, 1stdibs and HomeAway. They typically retained a listing based business model, but offered better content quality and more sophisticated tools and search.

In the mid and late 2000s, vertical sites became transactional, managing the payment process and taking a percentage of the proceeds. By closing the transaction loop their reviews also became accurate. By simplifying the transaction process and improving trust, sites like Etsy and Airbnb not only took share from Craigslist but grew their category dramatically.

Partly spurred by Craigslist inability to innovate, there has been an explosion of vertical sites of late as illustrated by the timeline below. The latest trend in marketplaces is the emergence of what I dubbed “end-to-end” or “e2e” marketplaces. Others have also referred to them as “full-stack” marketplaces. Even though transactional marketplaces simplified the purchase experience somewhat, they still require the seller and the buyer to do a lot of work. The seller has to take pictures, write titles and descriptions, come up with a price, and answer questions from buyers. Once it’s sold the seller also needs to pack and ship the item. For buyers depending on the category the experience can also be traumatic. A car buyer for instance needs to deal with financing, insurance, and registration, not to mention the fear of buying a lemon. To address these issues end-to-end marketplaces absorb the friction typically borne by buyers and sellers and do the work for them. They have emerged for product marketplaces (e.g;. Beepi, Lofty, Suitey, AptDeco, Fobo, Munchery), service marketplaces (e.g.; Uber, HomeJoy) and information marketplaces (e.g.; DoctoronDemand, Clarity, Rise).

These end-to-end marketplaces won’t completely take over the market. By virtue of their structure there is a limit to their potential market share. However, by focusing on high end customers who value their time and the quality of the experience above all else, they may end up capturing a large share of the profits in the market. As a result sites like Suitey and Beepi are more of a threat to real estate brokers and car dealers than to Trulia and eBay Motors.

All in all the marketplace world is seeing unprecedented innovation and disruption and I look forward to seeing how it all plays out while trying to make my mark in the category both as an entrepreneur and an investor.

The slides below are courtesy of Balanced Payments, the premier payment solution for marketplaces.

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To make the slides easier to share, I am also embedding the SlideShare version of the presentation.

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  • ” they still require the seller and the buyer to do a lot of work. The seller has to take pictures, write titles and descriptions, come up with a price, and answer questions from buyers.”

  • Thanks Fabrice. That’s an ever green article. In a funny way, the evolution does not mean that the older species disappear in a Darwinian selection. Unlike Craiglists, Classifieds sites continues to thrive 🙂

  • Thanks Fabrice. Great post. While you mainly focus on “services” marketplace it is interesting to see how the marketplace model is also reshaping the retail industry. With Amazon driving 52% of its sales (units) from its marketplace and traditional retailers embracing the trend (Walmart, Sears, Best Buy, Staples in the US, and more all around the world such as Fnac, Darty or Galeries Lafayette in France, El Corte Ingles in Spain (all powered by Mirakl) and of course the pure players such as Rakuten or Taobao). At Mirakl we have been accompanying this trend for the past 8 years as we have always been convinced that whether you are a large horizontal retailer or specialized pure player only a marketplace can let you efficiently leverage your brand to extend your range, optimize your fulfillment and grow sustainable and profitable revenues. Check our book “Marketplace : the future of e-commerce” at

  • The geographic evolution of marketplaces has also been a sight to see the past few years by companies like Rocket, Naspers & Rakuten.. over here in SE Asia we are teaching local consumers the basics of eCommerce.

  • Hi Fabrice, Txs for the story and the clear presentation. However, as mentioned below, it is hard to read the main categories in the middle. Is it possible to post a beter visual of this middle column. Thanks in regards.

  • I still love Craigslist for it’s simplicity and ease of use! It should never change. It is a great idea that is timeless!!!! Long Live Craigslist!!!!!!

  • Really great strategic analysis of the evolution of digital marketplaces. Love you using the CL directory as the source. What do you think happens to their sectors that still haven’t been innovated in yet? Too early or not worth it?

  • Great presentation! We want to take the time to recognize and thank the team at Balanced Payments. They have been an incredible partner has we continue to scale CareLinx, the In-Home Caregiver Marketplace.

  • Hi Fabrice, you forgot for the computer services… With 5,000 geeks across the country doing $4k/day in revenue and growing quickly, quadrupling our business in the last 5 months, iOS app out, expanding to a foreign country in a few months, maybe you can add us to the list… 🙂

  • Hi Fabrice, congratulations, this is a very nice and clever presentation of the evolution of online marketplaces. However I cannot properly read the categories in the middle. Do you have this presentation in a higher resolution by any chance? All the best from Berlin. Florian

  • Fabrice, I heard you on Meb Faber’s podcast interview. I’m a full-time investor (though not an angel). Your level of systematic thinking and mastery of the nuts and bolts just blew me away. Hats off.