Why peer-to-peer marketplaces fail, part 2: The focus is too broad

This is the second post of our 3 post series on why peer-to-peer marketplaces fail. Read part 1 here. Check back soon for part 3.

Focus by Mark Hunter | CC-BY license (http://creativecommons.org/licenses/by/2.0/deed.en) (cropped)It is surprisingly often that I talk to people who have this idea of a marketplace for “sharing everything”. And it does make sense intuitively: people who share their tools are probably also likely to share their cars. And when you have built a network of trust for sharing one asset, why shouldn’t you use that for other assets too?

The importance of focus is something every entrepreneur will hear pretty frequently. But in most cases the advice is to start from one vertical but then grow to be a horizontal player. For instance, Facebook started from colleges but eventually started catering to everyone. If there’s a single service for sharing everything online, why wouldn’t the same apply to the offline world?

However, the collaborative economy is a bit different. Sarah Lacy of PandoDaily explores this in her article “The sharing economy may be the first time verticals beat horizontals“. She quotes investor Shervin Pishevar, who explains why he invests in companies targeting only certain sharing economy verticals: “That’s what people want: A single purpose company that proves a very powerful service people can trust.”

Lyft is an example of a company that has gotten this really well. Their peer-to-peer marketplace only offers one type of services: rides. Meanwhile, more horizontal players like TaskRabbit, trying to cover all the different types of services, have struggled trying to scale their models. The same applies to rentals: many startups have noticed that focusing only on washing machines or 3D printers instead of going after multiple verticals at once.

It simply takes so much less time to build a good product if you are targeting a specific segment. If you try to please everyone, you often end up pleasing no one. Furthermore, it’s much easier to make a compelling marketing message and find the correct communication channels if you have a narrow niche in mind.

It’s also much tougher to build the initial critical mass if your focus is broad. Let’s say I am building a marketplace for sharing only power drills. It’s probably relatively easy for me to find 100 people in my city willing to offer their power drill for rent. With this initial supply, you are already pretty likely to please the person who comes to your site looking for a drill: it’s very probable they will find an available drill near them. On the other hand, if my site is for “sharing everything”, even the initial supply of 1000 listings might disappoint me if I need to find a specific tool.

One of the startups who got big press with the “share everything” concept was Uniiverse. They had a hefty amount of seed funding, wielded a gorgeous design and got their launch covered by TechCrunch and other major tech media. The TechCrunch article laid out their big mission: “…to become a service that allows anyone to share any kind of real-life activity or service”. These activities ranged from tool-sharing to rides, services and more. They also insisted that the best way to scale was to launch globally right away.

It seems they failed to get enough traction with this model, because since then Uniiverse has pivoted to focus on only one of their previous niches: they now call themselves as “The social marketplace for events” and are focused on selling tickets. Their geographical focus is heavily on a few key cities in US and Canada, where they have specific city managers.

Another example of too broad focus in the beginning is clothes swapping marketplace thredUP, which initially targeted all clothes but saw big growth only after the decision to focus solely on kids’ stuff. Only after they got significant traction in this one niche they were finally able to broaden the focus again.

It should be noted that as these examples show, broad focus in the very early days does not necessarily lead to failure. In some cases broadness might work for you advantage: when you’re trying to figure out the right niche to pick, you have to try a lot of different things. You just need to remember that when you’ve figured out your most potential target group (the one that seems to be taking off), you should focus strictly on it as soon as possible and forget about the others.

Also, keep in mind that doing lots of different things simultaneously is not always the best way to find the right group: I’ve seen some general purpose sharing startups fail because they didn’t manage to get traction in any of their multiple verticals. It might be a better idea to start with one niche and then change to another if it doesn’t work.

Lesson: Find a narrow (vertical and geographical) niche and focus solely on it.

Option pattern in Ruby

Have you seen this?

NoMethodError: undefined method `[]' for nil:NilClass

I bet you have, many times, way too many. However, it doesn’t have to be so. There’s a pattern that helps you to get rid of the errors you get when handling nil-values.

Meet Option pattern! The idea is simple: Wrap the value in a wrapper and treat nil values the same way you would treat non-nil values.

There are many existing gems that use this pattern. Also, I rolled up my own version called Possibly. In this post all the examples use the Possibly gem.

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3 reasons why peer-to-peer marketplaces fail (and how not to)

This is the first of a series of 3 posts. Check back soon for the upcoming posts. 

Fail Reel by Nicko Gibson | CC-BY license (http://creativecommons.org/licenses/by/2.0/deed.en) (cropped)Peer-to-peer marketplaces can be great businesses. They combine the convenience of online stores with the scale that comes from the notion that every consumer can also be a provider. This combination is so powerful that starting a new peer-to-peer marketplace might be one of the most popular online business concepts of the day. Many people are inspired by the recent successes of Airbnb, Etsy, Lyft and the likes and want to apply these ideas to new markets.

However, building a truly successful marketplace can be a notoriously difficult task. Many previous promising efforts have failed. I’ve been building marketplaces since 2008 and seen both a lot of successes and failures. In these posts I have tried to compile together all the most common reasons for marketplace failure, and the lessons that can be derived from them.

1 You’re not solving a real problem

This one is probably the most common reason for startup failure in general, but with marketplaces (especially those operating in the field of the collaborative economy) there is one specific caveat: everyone seems to love your idea.

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Faster Cucumber startup: Keep PhantomJS browser open between tests

At Sharetribe we take integration testing seriously. We’re providing a platform for multiple marketplaces which each have a different set of configurations and customizations. At the same time we are rapidly developing our platform further and deploying new features every week. When we release a new feature, we hardly ever do any manual regression testing. We have implemented a comprehensive test set which we trust to catch regressions. In addition, as a small startup we simply don’t have time to waste for testing manually something that can be automated.

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A startup with a social mission

Atlas, it's time for your bath by woodleywonderworks | CC-BY license (http://creativecommons.org/licenses/by/2.0/deed.en) (cropped)As many of you guessed, Sharetribe is not giving up open source or suing anyone over using the word “share”. The previous post of this blog was our 1st of April post of 2013. As the post was pretty much an antithesis of what we believe in and what we want to represent, I thought I’d use this opportunity to talk a bit about what, then, are the real mission, vision and values guiding our actions.

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It’s time to get real

Access Denied 2008 by Mike Licht (Creative Commons-BY license http://creativecommons.org/licenses/by/2.0/deed.en)April fools!  As many of you noticed, this was our 1st of April post of 2013. So no need to be worried, we will continue with our open, transparent and collaborative approach. ;)

This whole thing about “openness”, “transparency” and “collaboration” is all warm and fuzzy, but let’s face the facts: it’s not sustainable. After all, we are a company, so our main goal is naturally to make a whole lot of money. And as we all know, the best way to do so is to protect our intellectual property. We must realize that every other company in the world is our competitor. Thus, everything we create must benefit us and us only.

Starting from April 1st 2013, the code that we develop will no longer be open source. The old code is still circulating around the web, but beware of using it: our army of copyright lawyers might come after you.

Furthermore, we have a patent pending for our proprietary AP2PM (Awesome Peer-To-Peer Marketplace) Technology. The patent covers a number of areas, including allowing people tools to lend and rent goods, exchange services and share rides through using an online portal. Once the patent is issued, we are ready to proceed with litigation agains all parties that violate the patent.

Moreover, we have decided to follow in the footsteps of Facebook and disallow other organizations the incorporation of the word “share” into their names, to prevent their brands from being confused with ours. We don’t have the registered trademark yet, but luckily trademarks can also be asserted based on use of a term, so we feel that this is a very natural move from us. We will be contacting all the parties that infringe the trademark, and hope to reach a settlement that involves them removing the word “share” from their name. That’s right Shareable, OuiShare and The People Who Share, we’re looking at you, among many others.