A Crowded Space

A Critical, but Ignored Metric for Marketplaces

In the press and on home pages across the web you see metrics like 100,000 expert freelancers or over a million sellers or “adding 3,000 new users per day.”  Those all sound great, but they are irrelevant to the health of a marketplace company.  The press and other VCs still eat them up though, and that’s why you keep seeing more of them.  There is a much more critical metric being overlooked because it’s just not as glamorous. 

That metric is the number of full timers.

What sounds better to the press and investors?  

100,000 experts or 100 full-time experts.

I’ll take the 100 full-timers, but I think most others would go for the big numbers. 

Take a look at successful marketplaces:

• eBay has power sellers.
• Etsy has the 10k club - for sellers that have sold over 10k items.
• Uber has full time drivers.
• Rev has full-time transcriptionists.

oDesk’s core user base in the beginning was a very small (about 50) number of php programmers in Russia that we quickly employed nearly full-time.  I chatted with almost all of them on a weekly basis.  When they were under-utilized, I would work my ass off to find them a new client so they could continue working full-time through oDesk.

Full timers define the health of the marketplace.  The 80/20 rule is in full effect here.  Marketplaces need a metric to indicate how many people are really heavy users of the platform.  In labor marketplaces, you can think of it as the people that are relying on the platform for their primary source of income.  Those people will be incredibly motivated to help the company, to increase their earnings, and to invest in their online reputation. In contrast, if you don’t have people that are relying on you for their primary income, you’ll have a very fickle audience.  They will not care much about their online reputation, they will not drive turnaround times lower, and they will be disintermediation risks. They won’t open your emails, they won’t participate in your community forums, they won’t give you product feedback, and they won’t be telling all their friends about the platform.

It’s the full timer who will do that. 

You can also be sure that if you ask the full timers the Sean Ellis question, “how disappointed would you be without the <marketplace>?” – you’d definitely get the answers you’re looking for.

Second, look at the issue of utilization rates.  When I was in consulting, I had to maintain an 80% billable ratio. Same goes in labor marketplaces.  But, you need to work with the supply side to help them achieve the high utilization.  Make sure you have enough demand to support your network - make sure they can spend most of their time working and earning. In many cases, you need a surprisingly small number of providers to support the demand. 

In the past couple days I’ve had chats w two successful marketplace entrepreneurs. I was amazed to see that one of them had only 12 individuals on the supply side supporting a 32k monthly business.  He knew every one of their names and new that one was having some health concerns.  They were all part of the family.  In another conversation, Chris Waldron from TakeLessons shared that he included every provider in the network in a bi-weekly town hall meeting.  They were treated just as he treats the full employees of the company.  This could only happen with a complete focus on the core full timers of the business.

To judge success, a key metric should be determined for the business - maybe it’s # of people earning more than $500 per week, or # of people working more than 30 hours per week.  I bet Uber has phenomenal metrics in this regard for their drivers.  Every driver I’ve talked to says they get all their business through the platform.  If they had instead added 1000s of drivers before they had the demand to support them - all of the suppliers would lose interest very quickly.

So, the next time a VC asks “how you are going to get the providers” - just tell him that’s the wrong question to ask.