Marketplace Liquidity and Take Rates

"Differences in take rates are primarily driven by three factors: (1) whether you can drive new demand, (2) how much convenience you provide the seller, and (3) the level of competition in the market."

"Say you’ve already set a take rate and you want to increase it. Coming back to our formula, you have three options: 1. Increase the convenience. 2. Improve the demand. 3. Reduce competition: Tough one."

"The most dangerous strategy for any platform company is to price too high – to charge a greedy and overzealous rake that could serve to undermine the whole point of having a platform in the first place."

"There is a relatively clear distinction between “platform” businesses (which make it easier for you to run your business, like Patreon and Substack), and Marketplaces (which also bring you new business, like Doordash and Cameo). Platforms generally charge 5 - 15% and Marketplaces generally charge 10 - 50%."

"Companies like Upwork, Patreon, StockX, Doordash, Uber Eats, and Grubhub take advantage of The Take Rate Formula by offering different take rates for more or less Convenience and Demand."

"One of our favorite tactics is a divide and conquer cycle: Constrain geo, achieve liquidity, review geo (split or move). For example, if you want to launch in the UK, start with London. Achieve liquidity there - in my experience, it’s helpful to set a clear definition of liquidity based on GMV over time."

"We crafted a strategy that would transition the Airbnb marketplace from a “request to book” model to an “instant book” model. A world where guests could book available homes instantly. Though only 5% of bookings were “instant” that point, we set an ambitious north-star goal: 100% Instant Book."

"Lower size transactions means they have to be higher quality experience by definition, so you have to subsidize it. We heavily subsidize quality of the room, with great tables, great sound proofing. Meeting rooms are garbage normally. We went for quality through design."

"Once we had the tab within the Facebook app to drive buyer engagement, we settled on the key metric of weekly buyer retention."

"Since there’s so much confusion around this term, I prefer to avoid using it altogether when we’re describing operational metrics, and instead get specific about what I mean (e.g. fill rate, supply quantity, supply success, etc.). If you do use it, explain what you actually mean. Don’t assume anyone knows what you’re talking about when you say ‘liquidity.’"

"The most fundamental job of a marketplace is to efficiently match supply with demand. If you can’t do this reliably (i.e. fill-rate) or quickly (i.e. time-to-match), you’ll fail."

"Rooted in the challenge of offering better/cheaper products to customers is both (1) making sure your supply earns enough to make it worth their while, and (2) at the same time extracting enough value to build a profitable business."