Reduce information asymmetry and increase the possibility of a perfect match for the exchange of goods or services.
Editor’s note: This article from the micro-channel public number “outer stack” (ID: zhanwai_) , of: Bill Gurley.
Bill Gurley, a partner of the well-known investment bank Benchmark Capital, pointed out that the rise of the Internet business platform model has reduced information asymmetry and increased the possibility of perfect matching of goods or services exchanges, thereby accelerating division of labor and comparison. Productivity benefits from advantages.
The Internet breaks through the restriction of geographical location by linking economic traders who could not have been linked together, releasing economic wealth that did not exist, and achieving “making money out of nothing.”
Commodity trading platforms, sharing economy platforms, labor trading platforms, and other emerging platforms that: by releasing wasteful potential assets; better matching specific workers with specific opportunities; making specific assets accessible and discoverable; improving professionalism Degree of employment; enhancement of supplementary labor opportunities, etc., increasing wealth distribution.
Originally from Above the Crowd by Bill Gurley
In 1776, Adam Smith outlined his basic economic theory in his great work, The Wealth of Nations.
In the first chapter of Volume I, he realized that “division of labor” can increase productivity:
Due to the emergence of division of labor, even the lowest masses are generally rich in politically savvy countries. The output of various industries has greatly increased, and in addition to meeting the needs of workers themselves, industry products can also be sold in large quantities;
At the same time, workers in other industries also produce a large number of products, and they can use them to exchange a large number of other workers’ goods. The goods required by one person can be fully supplied through exchange with others, and the goods required by others can also be obtained from him. In this way, all levels of society are generally rich.
Smith found that when people have become experts in their fields and traded with each other, everyone’s productivity and living standards have improved.
In 1817, David Ricardo published Principles of Political Economy and Taxation, which further expanded Smith’s theory of comparative advantage. Ricardo proved mathematically that even if a country has only comparative advantages (not absolute advantages), it is in everyone’s best interest to embrace professionalism and accept free trade. In the end, everyone will eventually take life to the next level.
For these mechanisms to work, there are two key requirements. First, you need to have free and open trade. The facts have shown time and time again,When countries open borders and free trade, the end result is economic prosperity.
The second and less discussed requirement is that both parties to a transaction must understand each other’s goods or services. Unfortunately, information asymmetry or physical distance, and the resulting distribution costs, may offset economic advantages.
Fortunately, the rise of the Internet, especially the rise of the Internet business platform model, has reduced information asymmetry and increased the possibility of a perfect match for the exchange of goods or services, thereby accelerating the productivity brought by the division of labor and comparative advantage. benefit.
In a 2005 book entitled “The World is Flat,” Thomas Friedman said that the Internet has the ability to create a “level playing field” for all participants, making geographic distances less important.
The core reason why an internet business platform is so powerful is that by linking economic traders who were otherwise impossible to link together, they let them release economic wealth that did not exist. In other words, they are simply “making money out of nothing.”
Commodity trading platform
Any discussion of Internet business platforms begins with the first typical platform, eBay. Pierre Omidyar founded AuctionWeb in September 1995, and its fame is legendary.
From the website that only traded laser pointers and Doudou Dolls at the beginning, to today’s nearly 100 billion US dollars in annual turnover, in the legendary career of more than 20 years, the value of goods traded on eBay servers exceeds Trillion dollars. These transactions, as well as the profits made by the sellers, were “released” through eBay’s matching and bidding services.
In 1999, Jack Ma founded Alibaba, a Chinese B2B platform that provided potential export opportunities for small and medium-sized enterprises. In May 2003, they launched Taobao, Alibaba’s eBay.
Taobao quickly became China’s leading P2P trading website by actively launching free services. In 2018, Taobao’s total merchandise transaction volume (GMV) reached a staggering RMB 2,689 billion, equivalent to USD 428 billion.
After the launch of eBay and Taobao, there are many other successful commodity trading platforms-they all provide similar services to match those who own or produce goods with buyers interested in those goods stand up.
In many cases, deep focus on specific categories or verticals has made these platforms distinguish themselves from broader commercial platforms such as eBay.
1.StubHub, this is a secondary ticket trading platform. The company was acquired by eBay in January 2007. In the fourth quarter of 2018, StubHub’s GMV reached $ 1.4 billion, and throughout 2018, StubHub’s GMV reached 4$ 800 million.
2.Etsy is a leading platform for the exchange of old antiques and handmade goods. In the fourth quarter of 2018, the company processed $ 923 million in sales, equivalent to an annual GMV of $ 3.6 billion.
3.1stdibs provides luxury antiques, high-end modern furniture, vintage fashion, jewelry and fine arts, making it the world’s largest online trading platform in this field. Over the past few years, dealers, galleries, and manufacturers have matched billions of dollars of goods on this platform for transaction buyers and consumers.
4.Poshmark website can be used to exchange new clothes and old clothes. More than 4 million sellers trade on the site with a total revenue of more than $ 1 billion.
5. The Real Real, an online platform for certified luxury consignments. In 2017, the company reported sales of more than $ 500 million.
6. GOAT, a platform for exchanging sneakers. Despite its narrow focus, the company has achieved great success. The annual GMV valuation of GOAT and its main competitor, Stock X, has totaled more than $ 1 billion.
Shared Economy Platform
With the launch of Airbnb in 2008 and Uber in 2009, the two companies established a new category of business platform called the “sharing economy.” Houses and cars are two of the most expensive assets people have, and in many cases are assets that can only be held through debt (mortgage, car loan, or car rental).
However, for many, these assets are actually underutilized. Many additional rooms and second suites are vacant most of the time, and the average usage of a car is less than 5%.
The sharing economy platform allows the owner to “release” these underused assets to make money.
Airbnb was founded in 2008 by Joe Gbia and Brian Chess. Today, Airbnb has more than 5 million listings in 81,000 cities. Over 2 million people live in Airbnb listings every night.
In November 2018, the company announced that it achieved more than $ 1 billion in revenue in the third quarter. Assuming the platform’s commission rate is about 11%, this means that total room revenue for the quarter exceeded $ 9 billion, or annualized revenue of $ 36 billion.
In 2009, when Garrett Camp and Travis Kalanick founded Uber, they hatched what is now called carpooling. Today, more than 3 million people worldwide use their time and underutilized cars to generate additional income.
Without the right technology to match those who want to ride and those who provide the service, taxi and private driver companies cannot adequately meet the needs of the potential market. For example, we estimate that carpooling in San FranciscoThe service revenue is more than 10 times the revenue of taxis and premium cars before the service was launched. People gradually dismiss the idea of buying a car, and this number will further increase.
In 2018, the global carpool GMV exceeded 100 billion U.S. dollars (including Uber, Didi, Grab, Lyft, Yandex, etc.) and is still growing. Assuming a commission rate of 20%, this is equivalent to putting $ 80 billion into a car-sharing driver in a year—an industry that did not exist a decade ago.
GPS and smartphones make this possible, a huge release of wealth and value.
Using your own backyard to look after puppies has become an alternative to kennels. This is also a large and growing market. The marginal cost of keeping a dog is close to zero. Combining your time with unused assets, the dog nanny service appeals to consumers.
Labor exchange platform
Although not as widely known as commodity trading platforms or sharing economy platforms, the number of platforms that help match and monetize specific skilled labor is growing.
The most notable of these is probably Upwork, a company formed by the merger of Elance and Odesk.
Upwork is a global freelance platform where businesses and independent professionals can connect and collaborate remotely. The most popular categories include web developers, mobile developers, designers, writers, and accountants.
In the twelve months before June 30, 2018, the Upwork platform brought total service revenue of US $ 1.56 billion for 2 million projects of approximately 375,000 freelancers and 475,000 customers in more than 180 countries. (GSV).
Other notable emerging labor platforms:
1.HackerOne
HackerOne is the world’s leading platform that coordinates the world’s largest corporate “bug bounty” project with the world’s leading hacker network.
Vulnerability bounty programs that currently serve more than 1,000 companies. Most importantly, the HackerOne network of more than 300,000 hackers (more than 600 hackers added daily) resolved more than 100,000 confirmed vulnerabilities and brought in more than $ 46 million in rewards.
Gathering the world’s leading program projects and the world’s leading hackers on one platform has produced significant network effects.
2.Wyzant
Wyzant is a leading online platform that connects tutors and students. The platform has more than 80,000 tutors and has paid more than $ 300 million to these professionals.
3.Stitch Fix
Stitch Fix is a leading personalized apparel service providerEach order is hand-made by a “designer” working from home in his spare time.
Stitch Fix’s algorithm matches each client with the perfect designer to ensure the best results for each client. By the end of 2018, Stitch Fix had paid designers over $ 100 million.
4.Swing Education
Swing Education is a platform for substitute teachers. Swing has more than 1,200 partner schools and has filled more than 115,000 teacher absentee days. Having all substitute teachers on one platform can greatly improve efficiency.
5.RigUp
RigUp is a labor platform focused on the oilfield services industry. The platform provides a large, qualified, insured and compliant network of contractors and service providers in the upstream, midstream and downstream operations of each oil and gas basin, enabling the company to quickly recruit and track contractors Compliance and minimize management efforts.
In 2017, the platform’s GMV reached US $ 150 million, and in 2018 it reached US $ 600 million.
6.VIPKid
The VIPKid, founded by Mi Wenjuan in 2013, connects students studying English in China with native English teachers in the United States and Canada. All sessions are done over the Internet.
In November 2018, the company reported that 60,000 teachers had signed up to teach more than 500,000 students.
Through an in-depth understanding of specific vertical industries, you have a richer perspective on the quality and differentiation of participants, and provide a means to support transactions-you can create an evolutionary service that provides both parties to the transaction More value.
Emerging platforms
Hipcamp was founded by Eliza Lavasio in 2013 to search for the availability of campsites on dozens of state and national park websites.
As Hipcamp attracts more and more campers, landowners near many national and state parks have started contacting Hipcamp to ask if they can include their land in Hipcamp. Hipcamp now offers more than 350,000 public and private camps, with the most active private campsite owners earning more than $ 100,000 a year.
If you are a landowner, you can make “out of nothing” with very little capital expenditure. If you’re a camper, wouldn’t it be great to find a unique, customized camp in your favorite place?
Instawork is an on-demand recruitment app for gig workers (professionals) and the hotel business. These professionals seek economic freedom and a better life, Instawork for themProvides an opportunity for them to arrange work according to their time willingness.
For Instawork, 2018 was a breakthrough year. Revenue on the platform increased 10-fold, and professionals increased 12-fold. Instawork professionals are highly engaged on the platform and typically open the Instawork application 10 times a day. 97% of jobs can be matched in less than 24 hours, which is critical for both sides of the network.
It is also worth noting that the average salary of professionals on the Instawork platform is 150% of the minimum wage standard, which is much higher than many other labor platforms.
The power of the platform
When we can increase supply and demand matching of goods and services, and eliminate inefficiencies and waste caused by misinformation or distance, free trade, specialization and comparative advantage will be enhanced. As a result, productivity will naturally increase.
Global Internet business platforms have these special advantages:
1. Increase wealth distribution
2. Release wasteful potential assets (Uber, Airbnb, Hipcamp)
3. Better match specific workers with specific opportunities (Upwork, WyzAnt, RigUp, VIPKid, Instawork)
4. Make specific assets accessible and discoverable (Ebay, Etsy, 1stDibs, Poshmark, GOAT)
5. Improve professionalism (Etsy, Upwork, RigUp)
6. Enhance supplementary labor opportunities (Uber, Stitch Fix, SwingEducation, Instawork, VIPKid), so that workers can control the time and place of work
7. Reduce the probability of property being confiscated (mortgage, car loan, etc.) by increasing utilization (Uber, Airbnb, and Hipcamp)
If you are an entrepreneur who wants to create a new business platform, there are two caveats to keep in mind:
First, you need to find industries where there are obvious opportunities to improve these performances. If the network does not create real economic impact, it will be difficult to succeed.
Second, for a given rookie platform to be successful, a given market must be in the best conditions.