Online Marketplaces: Our Perspective

This was featured in our Quarterly Investor Update Letter from Q3 2014.

Breaking Down Online Marketplaces

One of the most exciting areas we’ve examined over the past few years is online marketplaces. It is our belief that part of Alibaba’s success came from the fact that it was a scalable, low touch online marketplace that could command highly attractive unit economics. To that end, we made it a point to spend significant time in 2013 and 2014 building a further perspective on online marketplaces, with the intent of deploying capital into these types of businesses. As such, in early 2013, we brought on Lorrie Norrington (ex-President of eBay) as an Operating Partner and have since completed multiple marketplace investments. Over the past 18 months we’ve gathered significant thoughts which we wanted to share with you.

How do we segment the market?

We split online marketplaces up into three buckets:

• Services Marketplaces – Marketplace where suppliers in the transaction are spending their time to provide a service in exchange for payment.
• Examples include: oDesk – provides freelance IT developers; Homejoy Handy – provides home cleaning services; Uber – provides an alternative for taxis and BlaBlaCar – provides ride sharing services.
• Experience Marketplaces – Marketplaces that contain a menu of events or reservations for consumers to evaluate.
• Examples include: Opentable for restaurant reservations, Golf Now for golf tee times, Stubhub for event tickets or Airbnb/Homeaway for home rentals.
• Product Marketplaces – Marketplaces where buyers can purchase physical products or browse to purchase physical products offline.
• Examples include ebay for general goods, Etsy for crafts and Zillow for real estate.