Strategies for seeding marketplaces

I just read a VersionOne post from May about seeding marketplaces. They identify four strategies (there’s more detail on each in the original post):

  • Identify unique inventory – sellers who don’t otherwise have an online outlet will list on your site (provided it’s easy to do) and you can use their product to drive demand. If you are lucky the sellers will bring some customers with them. Etsy is a good example.
  • Bring inventory from another site – hacking and scraping are common grey area tactics. AirBnB is a good example – see case study.
  • Pay for inventory – I think this only works at the very earliest stages, and even then I’d be careful. Apparently Uber did this in Seattle, paying drivers to sit idle whilst they built demand.
  • Aggregate inventory from other sites e.g. through affiliate programmes – scale comes quickly with this strategy, but adding enough value to become sticky can be challenging.

I would add another, and this is my favourite, and that’s ‘Using demand to acquire supply’. Our portfolio company Lexoo used this strategy, first finding companies that needed a lawyer and then calling up lawyers offering them customers if they register on the site. It’s brutally simple and highly effective. Only works in services marketplaces where customers don’t expect an instant quote.

My other observation is that in most cases one side of the marketplace comes much more easily than the other. On Lexoo supply comes more easily whereas on Appear Here, a marketplace for short term lets on the High Street demand is the easier side. The trick then is to build the easy side to make the marketplace super attractive for the more difficult side.

  • Do you think that a company like Lexoo will be able to capture anything else other than the long-tail of the market?

    My first reaction is that whenever you need someone to help you with a fairly standard legal procedure, you can use a marketplace to drive down the price, increase your negotiation power, and get access to multiple options with minimal effort. However, in those cases when you need a subject matter expert, and trust starts playing a role, sourcing from an online marketplace loses its appeal and other aspects like references play a much more important role…

  • Hi Daniel – Lexoo vet all the lawyers on the platform, monitor their effectiveness and only ask relevant lawyers to quote for each piece of business. Relevance is a function of specific experience and the extent to which the client wants to pay for quality.

    In effect, they are providing the trust element.

    So the answer to your question is yes, I think Lexoo will be able to take a part of the mainstream legal market.

    It’s early days but there are a bunch of good signs, including bigger jobs coming onto the platform and large companies using Lexoo for ‘overflow work’ when their usual lawyers are maxed out.

    “Do you think that a company like Lexoo will be able to capture anything

  • That’s interesting. I see the point. Makes sense. But, how can you quantify “quality” though? This seems like a field where it is very difficult to quantify quality due to the lack of quantitative metrics about lawyer skills and performance.. If you can crack that part, combined with the relevance factor it could open up a large part of the market.

  • The Lexoo team is largely comprised of lawyers and they look at a combination of case experience and employers to assess quality.

  • Hi Nic,
    We in tried all these methods. I would also add one more. Lexoo should try just post lawyers vacancies to local well-known job boards. Then you can pre-register them with info from their CV and shoot them an email with the ask to create a password as they have already had an account in your system. Preply found that approach very effective.

  • Thanks Kirill

  • Hi Daniel, thanks for your comments. I’m the CEO of Lexoo. We measure quality by having a multi stage screening process (going far beyond just the CV). As ex lawyers we tend to have a good feel what to look out for. And obviously we are insanely focussed on getting reviews (and non public feedback to Lexoo) after the job. so if we were to get it wrong reason we will find out this way and phase the lawyer out. So far so good though!

  • Cheers, thanks Kirill

  • Sounds good, Daniel. The biggest challenge that I see here is that it is not enough to have the right algo to define quality, but you will also need to build up trust on the demand side step by step. People need to know that they can trust the quality metrics, so they will start using the platform for larger, more complicated pieces of work. Without trust, no matter how great the algo is, the take-up might be somewhat limited. Good luck for this journey!