4 Challenges That Marketplace Businesses Face | With Bryan Clayton

So let's talk about some of the challenges about marketplaces. You mentioned quite a few, you know, starting service delivery process always involves human interaction still, right? You're building this at scale, at least in the, in your home care kind of services, you can call it. You know, so digitalized service and human behavior is obviously unpredictable. I don't know, you know, 2 sets of service maybe can't be identical. There are details and results. What's kind of your process for maintaining, you know, quality assurance among all your services and everything that's delivered? Whereas when you had your original company, you know, you were managing the team, you were on top of everybody. How do you manage it now?

Yeah, these are all great questions. And I think there's like a graveyard of Uber for X startups, you know, Uber for home cleaning, Uber for laundry service, Uber for park your car, Uber for massages. And like, you know, probably half a trillion dollars of venture capital crashed into the ground. Maybe not that much, but several billion. And so, and so, uh, the problem that a lot of these marketplaces, uh, in the early days, in like '13, '14, '15, and for like Uber for services, they, they, uh, the common problem they made was that they, they treated their service providers as fungible commodities. They looked at what Uber did and said, okay, yeah, that'll work for home cleaning. Well, it actually won't because, you know, while you might not care who picks you up and takes you to the airport, you do care about who's coming into your home and cleaning your home.

Correct.

And you want that to be the same person every week. And so, that was a common mistake that most every one of these Uber for X companies made. And we kind of almost made that mistake too. And then we realized, okay, we have to power that relationship between the homeowner and their service provider. And how do we like our— How do we architect the product to make that smoother and balance the wants and desires on both sides of the transaction? And so that was just something that quite frankly just took trial and error. You try to roll out one set of features and it pisses off one side of the transaction and then you kind of move back to the other side and it pisses off the other side. What we came to learn is that if service providers don't love it, I mean, if they don't love it, like if they don't wanna open it up every day and make money on it, then you don't have a product.

Hmm.

And you can apply that to dog walking, home cleaning, locksmithing, whatever. You have to start with something that service providers love to use and can make material income on. Because if you don't have that, then homeowners or consumers can't hire them off the shelf. And so, that's how we started off. And it might be my background in the industries, you know, I have the scars on my hands on how difficult it is to make a living in the grass cutting business. It might be that background that influenced that, but that's still how we approach it today. We, we over-optimize and over-serve the vendor side, the supply side, at the expense sometimes of the consumer side. Is the customer always right? No.

No.

Because their expectation is, uh, is, is Uber for lawn mowing, quite frankly. And is that like they, they can just push a button every, you know, 3 or 6 or 8 weeks and somebody will come mow their grass in 15 minutes? That's not the reality of how this business works. It's a route-based business. And so, uh, You know, really kind of figuring that out and building a product that works for both sides of the transaction was something that took us years. And I think that applies to most any multi-sided marketplace, particularly in the services industry.

Right.

And I think it's why if you're like a vertically focused app, like on one thing, that's how you can deliver that delightful experience. When you try to go too wide and be the Uber for home painters and the Uber for plumbers, I think it breaks down and you really can't deliver that reliable experience.

Makes sense. So, what would you say is the biggest challenge? So, you guys really focus on the quality of the service unless, like, when you're trying to balance the two, especially when you go into a new city, where are you focusing first? Are you trying to get users to sign up and start, you know, logging up, or are you trying to get all those, you know, service providers signed up first?

Yeah. So, like I mentioned, if you don't have happy service providers, you don't have a product. But the harder side of the equation to solve is the demand side. Usually, in any multi-sided market, The person putting their credit card down is the harder one to get.

Exactly.

And so, for us, we're demand constrained in every city because we can get as many quality service providers as we want. We have a strong value proposition for them where we really— the bottleneck is getting the word out to consumers. And, you know, we do that through Facebook, SEO, word of mouth, referral programs, but like we could handle 5x more. And so, that's constantly what we're focusing on as the platform is how do we connect the platform's value to more homeowners? How do we get this into the hands of more homeowners? Because we can always get more service providers. And, uh, that's, that's always been the challenge and the bottleneck. Now, now the thing is, is you got to make sure those service providers are good. And in the early days, we did that through hand-to-hand combat, you know, through personal interviews. I, I personally like knew the first 500 service providers that used the, the platform. I spoke with them. I, as a matter of fact, like in the early days, our product was so crappy Like we didn't really have a product for them. And so it was kind of like I had to speak with them on an ongoing basis to kind of like grease the wheels, so to speak. In fact, I offered free coaching and mentoring for like the first 100 service providers as a way to like get that honey and glue. And so that worked for a while, but then as we continued to grow and like we were doing like 1,000 transactions a week, that started to break down. And we had to really look at like, okay, what are some of the signals and data that our platform generates that we can use used to sideline the unreliable lawn care services and promote the good ones. And so, we measure these folks on a number of dimensions that don't normally exist in the analog world, like how often do they get booked a second time? How often do they show up on the day that they're hired? How often do they cancel? What does their star rating look like? And then there's like 6 more things. We know through our data, okay, these are the good ones, these are the ones that stink. Let's get them, expel them from the platform, or promote the good ones. And so, that's kind of over time with— through data and through the activity on our platform, we've been able to kind of ensure a better experience for homeowners than they would normally get, you know, trying to call somebody off of Facebook or off Angie's List.

Makes sense. And then, I know for somebody looking to start a marketplace, I mean, you know, with Uber and, you know, the Airbnbs, they obviously take a percentage of the transaction. How are you guys monetizing GreenPal? What kind of, you know, margins or fees do you typically— are you charging? I'm guessing on the service side, right? The contractors?

We take a variable percentage of the transaction depending on the contractor and how much activity they have on the platform. And then we also charge for some premium tools that they can use if they want. So it's totally free for service providers to use, to try and use, but once they start generating revenue on the platform, there's a transactional fee that that they pay, and then also if they want to pay for some premium things, we charge them for that as well. For homeowners, the price they pay is the price they see. There's no extra fees or subscriptions or anything like that. And so that's worked for us. That's worked for us to be able to fund the business and grow it off its own revenues without extracting too much value from the platform. I think that's a lot of things that— that's a mistake a lot of marketplaces make. They try to take too much value Out of the equation, and quite frankly, they're taking more value than they're delivering, and that's why they break down.

Makes sense. So another big challenge in the marketplace model is, you know, same lack of ownership where, you know, a customer may skip over GreenPal after that first job assignment is completed, right? You can say that with— this happens with Upwork, this happens with Airbnb. Do you have a strategy for customers or even partner retention to Make sure you don't— okay, they try this vendor, they love him, and then the next time they're just going to call them directly. How do you overcome that?

Yeah, so every marketplace deals with this to some extent. And as the founder, CEO, manager, whatever, of the marketplace, you can look at this as something that's happening to you. Like, you can have like a victim mentality, like, oh, why are they doing that to us? Or you can look at it like it's happening for you. And it's like, okay, why are they— why in the hell would they wanna go and do it the old way after we've delivered this delightful experience? And so, in the early days for us, we knew everybody that was using the platform, so that didn't happen. And then once we started doing thousands of transactions, we started noticing it was happening. And we started to, we had to really look at, okay, why in the hell would a lawn care service want to go and chase their money again? Why would they want to go back to pen and paper? Why? And so, we had to really like, ask why 5 times. And as it turned out, a lot of times it was we just didn't have a meaningful impact on their business enough to stick in the platform. So it was really kind of a density of clientele and a density in the, in their route that, that really mattered, that really caused them to have switching costs to, to take people off the platform. And so it's never been a huge problem for us, but the way we've approached it is We just have to drive these service providers more clients in a denser geo to make it to where, okay, they now have 100 customers on the GreenPal platform.

Mm-hmm.

And so why would they want to— now they're doing, they're running their whole business out of the app. So now why would I wanna go back to saying, hey, just mail me a check now or Venmo me now? And here's the other thing, the lawn guy is the last guy to get paid. And, and so now you have to go back to, oh, Mrs. Smith is 60 days behind, 90 days behind. Do I go, do I cut her service off? Like, this happens more than you would ever imagine, like more than half of the time.

Right.

And so on our platform, the vendor gets done and they get paid in like 24 hours and they don't have AR. And so, and, and so that's, it's like adding 10 times the value that we extract out of the platform is how we handle the dis— is how we combat disintermediation.