B2B Marketplace Network Effects

So I know there's a lot of B2B marketplace founders here in the community. And one of the questions that was actually added to the doc is with the kind of, I would say, lower interaction and kind of lower frequency of purchases, does it typically take longer for network effects to start to form with B2B marketplaces or?

To answer the question, yes, but not because of the frequency. So you see low frequency marketplaces in the consumer space as well, right? So you can still, though the path to liquidity is sort of different, depends on how differentiated the supply is, how hyperlocal it is. If you have both of those, it's very, very hard to build liquidity. The bigger issue with B2B marketplaces is not frequency, it's the distribution channel. So by and large, for most consumer marketplaces, consumers you can acquire via a scalable channel. Now you can debate whether paid advertising is profitable or not, and the unit economics there might stop, but it is scalable. B2B marketplaces, especially the ones that are challenged, tend to have this issue of trying to do direct sales on both sides. That's obviously a very long, slow process. So, you know, you get one buyer on board, he wants to buy something, you go, all right, I think that seller has something, you get that seller on board, you put them together, it's not really a fit, then you find another seller. And meanwhile, you have the existing seller, you need to find a buyer for him. And so it's really hard to transition from this brokerage to an actual scalable marketplace. So if you really want to scale that B2B marketplace, you need one side to have scalable acquisition channels. Like there's occasional situations where you might be able to do SEO or paid advertising for that side, like Alibaba for some, as an example. But in the vast majority of cases, that tends to not be the most effective way. The most effective way is buyer-to-seller virality where either you focus direct sales efforts on the buy side or sell side and they onboard the other side because you give them a tool or some sort of financial services like invoice financing that incentivizes them to bring onboard everybody they transact with. So that's a very, very good hack like Fair, probably one of the most successful B2B marketplaces, like they have that at the core of their marketplace. The second is situations where every customer plays both the buyer and seller role. And in that case, you're just doing direct sales to customers and then populating your network or your marketplace on the back of that. You don't have to worry about which ones are buyer, which ones are seller, they will end up doing both. So those 2 I tend to focus on quite a bit. Those tend to be very structural. So if you don't have that and you're forced to do direct sales for both sides, then you're probably not in the right space. It might be better to think of another area or maybe potentially experiment with other GTM channels to figure it out.