Marketplace Defensibility & Moats For Marketplaces At Scale Like Zillow

1 Dec 2023 · 3 min

Watch on YouTube

2:37

This content was created by Max Brun. This content was uploaded by Max Brun. This is a YouTube video titled "Marketplace Defensibility & Moats For Marketplaces At Scale Like Zillow" (created 2023-12-01). The excerpt is a speaker-led discussion about marketplace defensibility and types of moats, contrasting Zillow (which the speaker argues relies on brand rather than classic two-sided network effects) with a luxury co-ownership product called Picasso that is attempting to build network effects through a community and a swapping feature. The passage is delivered by an unnamed speaker (labeled SPEAKER A) offering analysis and examples of brand vs. network-effect moats in marketplaces.

Chapters

When you're at this sense of kind of scale, such as like a Zillow is at, you know, how do you think about defensibility for marketplaces where in that sense of scale? Defensibility comes from a network effect. This is kind of interesting. Like Zillow, none of the real estate websites have network effects. So if a listing on Zillow is viewed 100 times or 1,000 times or 10,000 times, it has the same quality. In fact, that same exact listing is on Redfin. And realtor.com and on Joe the real estate agent's website and the Compass website and is viewed, you know, 5 times, 10 times. And Zillow doesn't actually have any network effects. So its moat is its brand. And that's what keeps the traffic coming back. And that is powerful. Brand can be a powerful moat, but it's not as powerful as the Uber network effect of a 2-sided marketplace that A huge number of riders means it attracts a lot of drivers, which lowers the rate and lowers the wait time, and that improves the user experience in classic two-sided marketplace. Zillow doesn't actually have that. So I would argue it is more at risk of, well, it has a smaller moat, I guess, because its moat really is brand. And in that sense, it's not a traditional two-sided marketplace moat. Yeah. What about Picasso? Do you think— Picasso is trying to build a moat and network effect around a community of co-owners. So we've just built out a swapping product. For example, like I own a Picasso in Malibu. I own 1/8 of it, which is 6 weeks a year. In the Picasso app, I can become friends with other friends of mine that own Picassos, and I can, if I'm not going to use all 6 of my weeks, I can give up a week or 2, time in my Picasso to stay in one of their Picassos. So right now we have thousands of owners. It's pretty cool. I know 12 owners and one has a Picasso in Cabo and one has one in London and one has one in Aspen and et cetera. Eventually, hopefully we'll have hundreds of thousands of Picasso owners and that will be a very strong network effect. We're not quite there yet. We're still, you know, relatively new, but that is, you know, that is One way that we're trying to build a network effect. We also have a network effect around brand, but obviously that's not as strong a brand as Zillow, but in the luxury co-ownership space, it's really the only brand. And, you know, but again, I think brand moats are really relatively weak as compared to true network effect moats.