Market Networks – Intersection of Marketplaces and Social Networks
A detailed retrospection reveals that service marketplaces undergo evolution every five years on average. From the listings era in mid-nineties to managed services marketplaces in the middle of current decade, the depth and breadth of these marketplaces have steadily increased. While the scope is becoming wider, the business models are eliminating ambiguities. The success of social networks is enabling technologists to push marketplaces on the verge of another revolution called market networks. Thus, the aspirants aiming to build a service marketplace startup have an impressive opportunity at their disposal.
A marketplace for goods is also an option. However, this article emphasizes services because, as per the statistics from Bureau of Economic Analysis, consumers spend 69% on services and a mere 31% on goods.
The stats further reveal that only 7% of this spending on services goes toward internet marketplaces while the traditional brick and mortar service providers get the rest of it. The primary reason is the fact that consumers are distrustful of service providers since they carry an apprehension about providers of being inefficient.
Evolution and Scope of Marketplaces
The pioneering market used to be highly vague since there was no predefined domain in which they served. Instead, those platforms offered everything from product advertisements to job listings. Craigslist is a pertinent example. Such services were more like the advertisement section in newspapers.
Nevertheless, business owners and innovators brought clarity in marketplace business models by classifying services over the time under various categories. This classification gave rise to industry-specific on-demand marketplaces. These platforms were far more automated.
A considerable amount of trust built by on-demand services allowed investors to push money into managed marketplaces. Another reason for success of managed marketplace companies was the excessively high rate of digitization of companies. This digitization prompted businesses to outsource the technical tasks so that they focused more on growth. It also allowed a remarkable cost reduction. A number of B2B marketplace startups emerged as a result of managed marketplace business model.
One notable difference between on-demand marketplaces and managed ones is the fact that latter requires proactive trust building. You cannot expect consumers to trust you with massive amount of money for acquiring services unless you develop a trustful reputation.
Earlier, marketplaces tend to be more horizontal. In essence, they offered broad range of services, thereby targeting a greater consumer base. The access of wide segments of market allowed them to have users from a diverse range. However, the breadth disallowed such services to specialize in some areas.
Modern marketplaces tend to have narrower scope. Although this relatively thinner scope targets lesser audience, yet sticking to specific consumer-base improves business-consumer relationship.
How are Market Networks Reshaping Consumer Trust?
What is so good about Uber, or for that matter Airbnb and Alibaba, that people excessively use them instead of traditional services. It is true that these services facilitate users but what really encourages consumers is the amount trust.
These marketplaces have limitations as well. Consumers may trust a services marketplace to travel a few miles within a city or to make a purchase under $50. However, one is highly unlikely to acquire health services or house construction or renovation through a provider listed at marketplaces.
Social networks are another source of trustworthy connections. One would rarely make a LinkedIn connection or Facebook friend if the subject has crumbling reputation. The probability further declines if the underlying aim of this social relationship is a business affair.
While social networks and service marketplaces in their distinct capacities are serving to grow trust among providers and consumers, market networks at the junction of these multiply their individual impact. Market networks take a selection of features from social networks and marketplaces. People using such networks are able to develop more business oriented relationships rather than social ones.
The founders of marketplaces and investors alike speak highly of the significance of market networks. For this reason, an efficiently-built network tends to attract impressive funding as with the case of HoneyBook.
Telling Market Networks Apart from Marketplaces
Since a market network is an extended form of marketplaces, one may find it challenging to tell apart the two. Following are some of the most telltale signs which create the distinctions.
- Unlike an Uber driver or parcel delivery person, the consumers know their agents far more. They start knowing their service providers months or even years before trusting them with spending money.
- In on-demand or goods marketplace, any individual or group referring a service or product to another individual or group results in an increased likelihood of latter spending a small amount of money. The referrals in market networks, on the other hand, can result in huge business deals worth millions.
- Most of the relationships between service providers and consumers in marketplaces are volatile and remain for shorter periods. For instance, you would rarely make friends with your Uber driver or passenger even if you have interacted multiple times. However, market networks trigger longstanding relationships.
- The operating markets of market networks are excessively complicated as compared to services marketplace startups. Usually, it takes days, months, and years rather than minutes or hours to serve one client for once.
- Like the large amount of cashflow involved in each service provision, the amount of money for collaborations between businesses will also be massive.
Market networks do not tend to replace social networks. Instead, they will enhance them by developing a stronger bond between followers, friends, or connections. With a workflow provided by cloud-based SaaS, the startups providing market network platforms will be at the center-stage of corporate sector in upcoming times.
Startup development is one of the areas where Mob Inspire specializes with a decade-long experience and unparalleled expertise. The businesses which worked with us for their software tech infrastructure are promising to lead their respective industries in future. Contact us today and share your startup idea so that we can work together.