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.
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.