Why Marketplace Frequency Matters & Strategies For Low Frequency Marketplaces

You know, maybe, you know, what you see some of the main challenges are that low-frequency marketplaces, you know, face and some of the, you know, typical kind of strategies that can be used to overcome this and maybe sharing a few examples if you can.

We've talked about the importance of owning demand, and it's very hard for low-frequency marketplaces to own demand because keeping a mindshare in people's heads to go to you directly the next time they have the need is hard when last time they interact with you might have been a year ago or many months ago. So I wrote a post, oh geez, it might've been 10 years ago now on some of the strategies to overcome this. So one is you own the visibility on the networks people go to when they have this infrequent need. Historically, that's mostly been Google, but now TikTok, Reddit, Instagram, basically any network bigger than yours where your demand hangs out is a good place to try to get a ton of visibility. The Airbnb example is just having, even though it's a very low frequency marketplace, the product experience is so good that they will remember it 6 months later, a year later. And in the case of Airbnb, it was because it was cheaper than a hotel and in a cooler part of town. And then, you know, the third is that if the frequency of transaction is low, it doesn't mean, it doesn't mean the frequency of usage of the product has to be low. You can build community or browsing behavior that's not transactional, that's more frequent so that when the transactional need comes up, you're gonna be top of mind. Zillow is the canonical example of this with this estimate and creating, you know, browsing home prices, a more frequent behavior, even though you don't buy homes, you know, every 6 months. And then the last one I wrote about is making part of the value prop basically like an insurance product. So you want to create a relationship where the user needs to have a relationship with this product for safekeeping when something goes wrong. Okay, so that's like how to solve the acquisition problem in a low-frequency marketplace. You know, what, hopefully one of the 4 of those can work for you. But let's say you install one of these strategies, you should still be trying to sequence to higher frequency use cases over time. And most companies struggle with this because when you're a low frequency marketplace, you do a bunch of things to get viable. You optimize the company for immediate payback. You try to maximize the monetization on every visit. And those are the exact types of behaviors that will prevent you from building a product experience that people will build a direct brand preference for, or openness to new value props from, right? So when you look at these big low-frequency marketplaces, and a lot of the early ones were in travel, they're stuck in this like highly optimized growth model that cannot take them to new heights. They cannot like sequence to these different things the way that people who might've monetized a little bit worse, But crafted more on experience, have more openness from their consumers, more direct traffic to say, hey, now we do this other thing so that you can use us many more times a year. So that's the thing I counsel founders on, which is like, you can over-optimize low-frequency marketplaces and you will cap hard on like the ultimately how big a business you can build. And look, that might be fine. Like you might be a billionaire, it's cool. But generally, that can lock you out of some opportunities if you had been like a little bit more patient. It's like a marshmallow problem sometimes with low-frequency marketplaces that, you know, you have to make sure if you're eating the marshmallow now that that's really the right thing for you kind of short, mid, and long term.

It might be a helpful context though, if we were to say, you know, our range of kind of frequency, you know, how would you kind of define, you know, low-frequency marketplaces?

I would say the short term is kind of anything less frequent than monthly is low frequency, though it tends to be a little bit more binary in nature. Either you have monthly frequency or you have annual frequency. There isn't a whole lot in between. And the thing to keep in mind with low frequency marketplaces, you can build great businesses that are low frequency. I don't know what Airbnb's market cap is today, but I assure you it's a lot. So like it's not a death sentence in any way. But when you are a low frequency marketplace, every other component of the marketplace has to be way better to make up for it. So either your AOV or your cost of acquisition or Your take rate, like probably all 3 of those need to be better to make up for the fact that you're not having a high frequency of transaction, you know, like say like a Grubhub or a DoorDash. And I've seen some founders do very well at optimizing the other ones because they can't really move frequency. And that's totally great. I'm like big proponent of that, but it just stresses the other parts of the model more when you can't get frequency high. You can get a lot of mistakes, you can make a lot of mistakes if your frequency is high.