In May 2015, I had a discussion with Cristóbal Gracia about our experiences in helping marketplace entrepreneurs with their fledgling businesses. We noticed that both of us had heard the same story multiple times: an enthusiastic small team has a big vision of how their marketplace will change the world. They start building their business. Soon, the struggle begins. What seemed easy on paper turns out to be extremely challenging in practice.
Make no mistake: not all marketplace ideas are great. Some of them deserve to die. However, most marketplace businesses that fail today don't fail because the idea itself is bad — they fail because of poor execution. People keep making the same mistakes over and over again. If only people were aware of these situations and knew how to handle them, mistakes could be avoided.
We were both fans of the "Lean Startup" approach to validating business concepts quickly and with as little waste as possible. However, we realized that the existing books about the topic were lacking a practical approach for applying the method to building a two-sided marketplace in particular. Marketplaces are quite specific in nature, and building them requires specific knowledge. Previously, this knowledge has been acquired mostly through trial and error; only once you've built a marketplace business or two do you become an expert on these topics. That's how we learned this stuff over the past 10 years: by banging our heads against the wall ourselves, and watching countless other people do so as well.
It doesn't have to be this way. There's no need to learn everything the hard way. The applicable tactics and techniques can be studied in advance, helping you avoid the most common pitfalls.
This is what our new book is about. It's a handbook for anyone building an online marketplace. The same methods will apply whether your organization is a startup, a cooperative, a nonprofit, or a big brand. We believe there are thousands of marketplace ideas out there that can make for great, sustainable businesses. With the help of this book, you're one step closer to building the next one.
Excerpt from Chapter 16 "How to turn your marketplace into a community" from The Lean Marketplace:
How to build a community
As we discussed before, building a community has plenty of benefits. So how do you actually go about doing it?
Since marketplaces are two-sided beasts, you first want to understand which side to focus on. In some cases, it might make sense to involve all your users in the same community, especially if they act as both a customer and a provider. This is the approach ridesharing marketplace BlaBlaCar took: they highlight stories of both drivers and passengers on the same page.
The current trend, however, seems to be to focus on a marketplace’s most valuable user group: the providers. For instance, Airbnb’s community center is clearly targeted at hosts, even though some of their meetups are open to guests as well. Etsy, Uber, and Thumbtack use a similar strategy, focusing their community efforts on sellers, drivers, and pros, respectively.
As your platform grows, you might even consider building several communities. Etsy has so many providers that it's increasingly difficult to create a feeling of belonging to a global community. Their solution has been to build "teams" that focus on specific areas of interest. For instance, The Old Farmhouse Gathering is a group that appeals primarily to whimsical and folk art crafters.
There are several different approaches for building a community. What works best for you depends on the stage and type of your marketplace. We will now review the most common strategies.
The first step in building a community is to think about what you stand for. What is the purpose of your marketplace business? What change do you want to see in the world? If you want your users to identify with your marketplace, they need to identify with this mission. Our recommendation is to think about your mission from the very beginning, way before you launch your platform or even start talking to your users. Clarifying your mission — both internally and externally — will help you identify the people who relate to that mission.
Airbnb has put a lot of effort into understanding their essence. As Airbnb founder and CEO Brian Chesky puts it: "For so long, people thought Airbnb was about renting houses. But really, we're about home. You see, a house is just a space, but a home is where you belong. And what makes this global community so special is that for the very first time, you can belong anywhere. That is the idea at the core of our company: belonging."
This is an idea that resonates with many travelers: your home is where you lay your hat.
Etsy, meanwhile, stands for handmade items. In 2007, Etsy — along with partners — released a Buy Handmade manifesto, and urged people to pledge to buy more handmade since it is better for the people and the planet. Naturally, this is a message that resonates with crafters.
Remember: when you stand for something, it usually means you also stand against something else. Airbnb stands against impersonal hotel experiences. Etsy has traditionally stood against mass production. Do not try to have a mission that resonates with everyone. The result will be a bland statement that nobody really identifies with. Instead, be bold, and be prepared to make some enemies along the way.
Once you have clarified your mission, you need to stay true to it or you will be alienating your community. Etsy recently embraced mass production to reap more profits. The move caused many original sellers to abandon the site, and damaged Etsy's reputation.
Tap into existing communities
Instead of building a community from scratch, see if a community already exists around your cause. As Facebook founder Mark Zuckerberg said when he was asked about how to build an online community: "Communities already exist. Instead, think about how you can help that community do what it wants to do."
Etsy was born out of a need of an existing community. As one of the co-founders, Chris Maguire, explains, the founders were running a freelance web design shop before Etsy. One of their projects was a redesign of an online forum for crafters, GetCrafty. The founders became active members of the forum and soon realized many of the forum members wanted a place to sell their creations online. They went on to build such a solution. While building it they discovered an even bigger forum, Craftster.org. They contacted the founder and suddenly had a huge audience.
Know your early members
While you want to think about your mission before you have any users, it is good to keep in mind that ultimately it is the users, not you, who define your community. Thus, it is important to get to know them early own — to understand their needs, and learn how to talk to them.
Brian Chesky was homeless for months, living with one Airbnb host to another. He wanted to know everything about the service and its users. He received important feedback and built relationships with their early adopters.
The EatWith team hosted dinners themselves or participated as attendees in other dinners. They did this to get to meet the customers in real life, better understand the EatWith experience, and keep learning about their service.
Allow people to interact with each other
Once you have found the people that identify with your mission, you need to help them communicate with each other. You should offer some kind of communication platform that lets people interact freely without the need to engage in a transaction. This helps them realize that instead of being alone, they are surrounded by like-minded individuals who identify with the same mission.
Most popular marketplaces — like Airbnb, eBay, Etsy, and Uber — offer community forums where their users can interact with each other. Starting with a more lightweight approach can be enough; perhaps a Facebook group, or even just a hashtag on Twitter or Instagram.
During your forum's early days, you will face the same problem as with your marketplace: it is empty and needs a critical mass of users to function properly. Just like you need to seed your marketplace, you also need to seed your online community.
One way to seed content is to start discussion threads yourself. A great way to get people to talk is by asking them questions. People love to talk about themselves. Create an introduction thread where every new provider can tell a bit about themselves and why they joined. This not only helps seed the community but also helps people trust each other as they hear each others’ stories and realize there's another human being behind that avatar.
Seeding also helps set the tone of the community. Others will follow the example of the early adopters. When popular online community site Reddit got started, its founders went quite far with this strategy: they created fake accounts and had conversations with each other just to showcase what a civilized conversation on Reddit could look like.
When your users start creating their own threads on the forum, make sure every thread gets a response. People want their voice to be heard.
Highlight your users' stories
When new people join your community, they want to learn what the community is like. Sharing the stories of your users helps them familiarize themselves with existing members. BlaBlaCar, for example, invests heavily in showcasing users stories on their BlaBlaStories site. Thumbtack also highlights stories from their successful professionals and happy customers.
Obviously, these stories communicate the benefits of the marketplace, but they also have another purpose: by reading a few stories, you get a basic understanding of the kind of people who belong to the community. More importantly, you can also decide whether they are the kind of people you would feel comfortable hanging out with.
Celebrate power users
When your marketplace grows, you will notice certain users who bring in a lot more sales than everyone else. These people are your power users. Consider offering them special perks and advantages.
Airbnb has a SuperHost program that rewards hosts who offer excellent customer experiences. SuperHosts receive travel coupons, priority support, and other similar perks. Ebay has a PowerSeller program that rewards qualified sellers for reaching specific goals around sales volume, feedback, policy compliance, and account standing.
Curate the community
Similarly to how you want to highlight certain members of the community, you also want to weed out the bad apples and remove inappropriate content. In active forums, moderation can be quite a time-consuming task as you need to go over a large amount of content every day. This means you should only open a forum once you know you have enough time to maintain and curate it.
According to Nish Nadaraja, the creator of review site Yelp's Elite program, when building a community, one of the first things to figure out is a mechanism for conflict resolution. Conflicts are inevitable. It is a good idea to set clear ground rules and provide an example by being active in the community yourself.
Note: do not confuse moderation with censorship. While you want to remove users that are aggressive or malicious towards other users, you should not remove users or content that criticizes your platform or customer service. Doing this will backfire. This type of action will not go unnoticed and users will interpret it as an attempt to silence valid criticism. A better way to respond is by addressing the critique politely but firmly, and explaining your position.