Marketplace expert Andrei Hagiu identifies two critical mistakes: leakage, where buyers and sellers move transactions off-platform after discovery, and neglecting defensibility while chasing product-market fit. He compares leakage to carrying water in a leaky kettle, noting it's hardest to fix when deals happen in-person or repeat.
Chapters
you've of course spent, you know, as I mentioned earlier, almost like what, 2 decades now kind of studying marketplaces. So I'm sure you've seen quite a few also, you know, mistakes that they've kind of made over the course of time. So, you know, what do you think some of the biggest, I would say, like maybe misconceptions or mistakes are around marketplaces?
That's a good one. I mean, I'm sure there are other people that have seen more. So the one that I'll just say what first comes to mind. So the first one is the issue of leakage. So the leakage or disintermediation. So this is the idea that You know, you, your marketplace offers discovery, so buyers and sellers meet, but you have a hard time keeping the transactions on the platform because you don't offer enough value after discovery, right? So this is something I think a lot of people can relate to. I've seen at least a couple marketplaces that have never truly, I'm not gonna name them, but I, it's been very frustrating to see like lots of potential, but they never truly seriously address this problem. And it's just basically like you're trying to carry water with, what is it like with the, with the, Bullet-ridden like kettle, right? It's just like you're getting water and it's like the water keeps keeps leaking out. It's just like it's it's quite painful to see. So I think it's some again. I think it's something. It's something in some context, by the way. Leakage is very hard to address. Like if the buyer and sellers meet in person, if they want to transact repeatedly, okay, I understand it's harder, but there's always things you can do. Like there are always incentives you can provide to make it to make it better. So. That's, I think that's a big one. Yeah, the other one, I think it's just where we talk about defensibility. So like, you know, worrying a little bit too much about like, let's get product market fit and not worrying about like building barriers to entry like early on. So I think that's, I know it sounds a bit general, but I think it's, that's always an issue with marketplaces.
