The Z47 Podcast | Marketplaces

With Marketplaces on the rise, today’s episode covers how Marketplaces haveevolved as a sector and an analysis of the differentiated business models that work for different markets. Joining us to discuss this is Rajinder Balaraman (Director, Matrix Partners India) and Avnish Bajaj (Founder & Managing Director, Matrix Partners India).

Rajinder:

Hi, and welcome to Matrix Moments. Avi, thanks for doing this one, this is on Marketplaces. Marketplaces are actually bouncing back really strongly and doing much better than traditional offline industries. So, I think it's a good time for us to revisit what we know about marketplaces, And what we think will change going forward. Let's perhaps start from the basics. What are the different types of marketplaces out there and how should a founder think about which marketplace model is right for their market?

Avnish:

Rajinder good to be back again, who knew that we would be sitting here doing this stuff till now. And you know, you mentioned that it's overall a good time for marketplaces. I think marketplaces have evolved a lot, but in the post COVID era, everything is a marketplace, right? By definition, if you can't meet and you want to meet virtually you know, Zoom is becoming a kind of marketplace, but let's back up. Before we start, I think this is a topic where our role is to help founders by bringing together stuff that's already out there. I know you have done a lot of work on this, I've done a lot of work but I don't think we'll have new dramatic insights, but hopefully our not incremental contribution to the community is that we have brought it at all together. We'll see if we can publish a blog post around it, depending on what people think. And we should absolutely include links and a big shoutout and acknowledgment to the guys at a16z, Andrew Chen who puts out a lot of stuff on marketplaces, which I have referenced throughout my life by the way, throughout my career. As well as a bunch of articles out there.

Bill Gurley of course, whose been the God of marketplaces. This has been an industry that actually evolves a lot and we'll talk through some of that and it evolves pretty fast. And so some of the challenge has just been, you know, to track everything and hopefully, this is where we can provide some insight.

So with that, let's back up. I came back with Suvir to India to start the equivalent of eBay, right? Believe it or not, there was no term called marketplace, so it was an auction site. The reality is Pierre Omidyar, and eBay started the first marketplace in the world. And by definition it's because it truly brought out the power on the internet - retail on the internet is just retail offline, but with a different frontend and distribution, right? Because you have inventory and stuff. Marketplace actually allows you to connect people across geographies, which never used to happen before, which could not happen before without the internet. We started Baazee, we started struggling about maybe a couple of years into it, and I still remember using this line internally saying, we need the Amazon user experience on the eBay business model. That's what a marketplace is.

Marketplace is now, I mean, obviously, we'll talk about thin stack versus full-stack, but it's more that kind of thought and at that point we started seeing Amazon actually start launching its own. At that time, it used to be called Amazon marketplaces. Today Amazon is a marketplace. In those days there use to be Amazon and there used to be Amazon marketplace where third parties will go. So can you imagine where the evolution has gone. That's kind of the background. Now let's define some terms and a year from now there will be new terms. So marketplaces evolved like we saw with Baazee this challenge of fulfilling transactions, customers wanting a certain user experience, eBay, Craigslist type of marketplaces, were traditionally thin stack marketplaces, Craigslist being the thinnest stack, right at the top, lead generation, eBay a little bit more with later on adding payment, but earlier there wasn't even payment. But a little bit more in terms of verifying sellers, then it became what we had to do at Baazee, which today Amazon does, every seller's verified, every good is rated, payments moved through the system. We didn’t still go into warehousing and logistics, which is the FBA fulfillment by Amazon.

Basically, all thin stacked up marketplaces realized that you cannot deliver a user experience that users want without going a bit deeper into the stack and therefore full-stack. Now, most people use the term managed marketplaces to mean full-stack marketplaces. I don't, but I am no authority, my view is managed marketplaces, also manage a different level. Some will do warehousing but basically the biggest thing they do is they do something incrementally or non-incrementally differently to deliver a better user experience. And that comes with taking on some risk. And the extreme example of that is Beepi. And some of these new marketplaces, which are full stack managed marketplaces, they buy a car from you, and then try to sell. Now, look at the amount of risk Beepi took, its run of business.

Full-stack versus thin stack, evolution has eBay and classifieds, which later on called thin stack, which over a period of time become full-stack, AKA managed market. There's another twist to it and it's called “market networks” and we will come to one more criteria which is three-sided versus two-sided, but market networks are where you're providing some kind of a software or workflow solution into a managed market. And it can also be a Trojan horse to get into the sector. So Practo could be one of them, OpenTable at one point became one of them. So just the latest thing where I think the best way to think about it is if Facebook were to launch a marketplace, right? You have people, you have their networks that you are playing on. And if Facebook were to provide some kind of identity management tool, then it will become a market network. I think most complex services would become marketplaces, so you can imagine an architect, which is why Practo, doctor uses Practo SaaS solution. It's kind of a Trojan horse is able to connect patients and you provide the whole experience. So full-stack, thin stack market networks, final one, three sided versus two side. Most of the stuff we see is actually a two-sided market, but three-sided is much more powerful, right? Look at Instacart. Instacart has customers, it has couriers, and it has the Walmart's and wherever they shop. In our portfolio, we are Park+. Park+ is whoever owns the real estate of the parking – it has the consumers and then the companies or the brands or the malls, or whoever wants to park. We have one in Foxy, which does artists, these beauty brands and of course consumers, these marketplaces are harder to start, but they are, they have the ultimate move. Right. So, I think this is your world classification. I think this sets the stage for some of our discussion. But that's kind of the lay of the land.

Rajinder:

No, fantastic. I think that also in terms of just evolution, it sounds like the word started with thin stack moved towards managed marketplace and now increasingly market networks and three-sided marketplaces are actually where the models seem to be evolving, but more specific to certain industry types. So very, very helpful. if I have to just double click on one of those, I would say you know, maybe an example is, you know, there are some marketplaces, like for example, say Ola where actually there are different models even within the same company.Do you have a view on, you know when someone is picking a marketplace model, whether that model is the absolute model or whether for different segments of the market?

Avnish:

It's a great point and this is a very good question – this is exactly the reason I don’t believe full-stack and managed markeplaces are the same thing. Ola where they own the cars is leasing them out to the drivers, is a full stack marketplace right. Now a real full stack marketplace, which is a consumer brand would be like Meru, this is a great example, Book my Cab, which would be the thinnest stack, Meru is the fullest stack - they own their cars and they pay their drivers salaries, right. Now Ola has that piece of the business. But they have done a spin on that. They own the cars, but they pay the drivers on usage. Right? So, which is why to me that is really the full stack, but the other 70, 80% of all Ola cars we see on the road that is a managed marketplace, but it's not full stack because the drivers own the cars, which is why I think there's a nuance difference between full stack and managed marketplace. And it comes down to how tightly do you own your supplier and how do you incentivize your supply? I think that's the net-net, because all of this is old supply. What is the right answer? I think over a period of time, you will have all of these elements. How would I start? I would start from full stack and move to manage, right? Because ultimately that's what will get you to scale, they do co-exist.

Rajinder:

Yeah, okay. Clear. I think, this is actually quite exciting and now suddenly there are like dozens of marketplace models that seem to be becominh feasible with basis this framework. I think at its core, it sounds like, you know, marketplaces serve a user need by connecting buyers and sellers. And it's very feasible to do that by, aggregating supply and you have the makings of a marketplace, to go with, right.But how do you know if you actually have a PMF in the marketplace and or put another way, like what characteristics of a marketplace actually makes it a successful marketplace or an attractive marketplace to possibly invest or start and scale?

Avnish:

So leading up to this, I actually thought a lot about this, which I hadn't thought about earlier. Earlier if you’d asked me it’s a very simple answer, generate incremental income for supply and then you'll attract supply. If it is differentiated, you will attract them. But if you think deeper, when eBay started, they actually created and Meg Whitman who was a CEO at the time and Pierre used to say that we created incremental GDP because you had collectors of artistic items, who are not trading with each other before, right. This trade was not happening in the economy, the spend wasn't happening in the economy. I think that's the ultimate market. If you can generate income, incremental income for supply, and if you can generate incremental spend from demand, and I asked you this question earlier, do we even have examples of that? It's very, very hard, but let's do the contra examples, Ola great incremental income for supply, but it is 70-80% substitutive of my spend, whether I'm spending on car or on public transportation, Airbnb outstanding supply, largely subsidiary. Now one could argue the frequency, like you have said, maybe frequency goes up, maybe amount of spend goes up, people travel more because they can do Airbnb. Tarun was making the same argument, but wouldn't it be amazing if both sides were incremental.

Rajinder:

Yeah, and I can think of few examples. I think one that comes to mind is obviously is EdTech it seems to have really exploded because there's just a, I guess the best way to look at it is there is new consumption because of availability or discovery. So in the India context, it could be students sitting in tier two, tier three cities who don't have access to high-quality teaching. And therefore, basically learn from school and maybe they do a few tuition classes, but it doesn't really serve the purpose, and then they drop out. But because of ed-tech and, technology, they're able to actually access really high-quality teachers from the best cities, or top cities. And so that actually creates consumption, which didn't happen before you went to school, but kind of never did anything meaningful after school. The other option is maybe increased the frequency of consumption. So I can think of some categories, content is a great example, right? or even music. I think all of us, listen to music before all of us, watched movies. But when it comes to say Spotify or Netflix or Gaana or and all these similar models, just the ubiquity, mobile form factor, high-quality content, the independent artist, the long tail discovery, discoverability of the long tail. I think the increased frequency of -

Avnish:

So it was you and I were chatting. Spotify decided to shut down its independent artists, but that's kind of the perfect one, right? incremental income for the independent artists. And there's always a guy who likes that kind of music and they are willing to spend incrementally. So I think it would be ultimate. Let me make. So just stepping back, when do you know your PMF? I think it has all been supplied driven so far. Everybody has been looking at supply as the biggest way to get this. I think the difference that will need to happen is 10X demand. And while we were thinking about it, we had this tweet by Bill Gurley, where he said it's all about demand aggregation. And I don't think people have paid enough attention. People generally aggregate the supply and because it's incremental income, but then they struggle to scale the marketplace. So you have to get the demand side. Can you create a 10X experience and consumer brands think like that marketplaces don’t and I think if there's one takeaway, like it has changed my own thinking that I would want to have that 10X demand experience and GOAT versus eBay is a great example. GOAT is a Matrix US investment, a high-end sneaker brand. They give you money-back guarantee. They inspect the damn sneaker and then they send it to you. My son has made me buy something on it, high EOV, very high satisfaction. So I think I ultimately supply incremental income everybody has been talking, but you have to have it with 10X happiness. Again, I think one of the terms using by one of these guys 10X happiness on the demand side. And then can you make money doing that.

Rajinder:

Nope, super helpful. I think most of the conversations tend to be around supply. So agree with you that not enough conversations are happening around demand. Just picking up from there. If I have to like actually distill and measure some of this, I think we're familiar with cohort analysis and stuff like that, is that the best way one should measure marketplaces? And is that the framework one should use to kind of distinguish between a normal kind of internet business versus a marketplace on fire.

Avnish:

Yeah, you make it sound like it's an abnormal business, but yes it is. So, let's separate the usual metrics, so to speak. And then the unusual abnormal marketplace specific metrics.

So cohorts on both sides, I'm not going to belabor. We have covered it everywhere. Specific to marketplace, incremental income on the supply side. And how is it increasing? Now, remember, let's take a Ola driver. If he was a driver with me or you or anybody else, he would be getting annual increases in salary. In marketplace, you want to get all these people going and if a lot more supply comes on, this guy's income is decreasing year over year. It doesn't even keep up with inflation. So, it is extremely critical to look at your most loyal supply cohorts and see if the income generation curve is increasing or not. And you can match supply and demand in our marketplace, which I think Ola has done a fantastic job where for your most loyal supply that's what you're measuring. Income keeps increasing year on year, obviously, your bi-side demand has to increase also but you have to channel it well.

Coming back to the 10X experience. If it is truly 10X experience, my GMV cohorts should go up, the buyers buying at least in value for the cohort should keep going up. Most marketplaces don't go here. And actually, I don't think I've ever made it a big deal, but if the marketplace has to become massive, it has to happen. Look at Amazon now, Amazon is the ultimate marketplace and our spends on Amazon, that's cohort I mean. That's why Bezos is the richest man on the planet

Rajinder:

His stock is up by 50% in the last three months, like crazy.

Avnish:

So marketplace specific marketplaces by definition will do well if they are fragmented, not if they’re concentrated. You need to measure fragmentation or concentration of your supply base. What is the Pareto? is 5% generating. 95% of your sales - you are highly exposed. You have a flag exposed somebody can come and get you. You have to flatten the curve. You have to get 30, 40% of your seller base generating most of your sales, and also on the buyer side it should be flat. Otherwise, it's too concentrated and frankly network effects and all of that won't really come into play. It's just a very tight marketplace.

I have a great measure I think of network effects. See, we all talk about cohorts and when we even around, when I'm seeing here, it looks like horizontal . If network effects, which are defined as every incremental buyer or seller that adds value to the existing buyer or seller that is happening, you have to look at vertical cohorts, vertical retention, which is as I'm going by month, I am seeing that my new users are getting retained more in the first, second, third month because they are seeing more value. And I don't think anybody does that. So I think you can actually measure network effects.

Rajinder:

It sounds like it's as simple as just transposing, what everyone else is looking at. Just the horizontal cohort transposed is like the vertical cohort.

Avnish:

No, vertical cohort is not, vertical cohort is M1 off your different months has to go up. If the first month was 25%, if the second is 25, most of us will say acha 25 is going to 20 this is good and its staying steady. But if 25 is going to 28 it is going to 32 is going to 40 in the M1 with each passing month for that new user, it is telling who that user is driving more value. So the vertical cohort in the same representation.

Marketplace specific are sellers and buyers swapping their roles? Now Uber, Ola type of model generally don't have that happen, but eBay absolutely. And I don't know like Spotify, which is what I'm struggling with some of these things to say, examples of marketplaces and do that Airbnb, for sure, the issue is not just the numbers. The issue is if you're trying to provide a world-class buying experience or a world-class selling experience when that seller becomes a buyer, he knows what the experience is. That self-improvement curve will kick in, loop will kick in where they'll start improving their experience. One very interesting one I learned while researching this multi-tenanted, classic Ola versus Uber issue. What percentage of your users is on other platforms, right? And can you increase their switching costs? So if you are sending them the most profitable customers, it takes the switching costs up and most people are not doing that. NPS, we have discussed, that one of our favorite new numbers is the Sean Ellis test on habit-forming. How much would you miss it if it wasn't there, and I think marketplace specific, there is a take-rate, if that take-rate is less than 20%, you're not adding much. My view is I would like to see marketplaces at 30 to 40% take-rate then the gross margin of that take-rate. And if that is not 70-80% and you are doing too much work to get that take-rate, I don't think it's an interesting commercial business. And finally, remember that you're acquiring buyers and you're acquiring sellers. So you have to look at LTV to CAC on both. So I think there's a lot of metrics here, but hopefully, we’ll summarize it later.

Rajinder:

We will do something later on this line, as you suggested people want it. I think one term, which we've also used is liquidity internally. And I guess up until a certain point, you had said that full-stack makes sense because maybe it's partly to create the customer experience partly also to create the liquidity on the marketplace.But it sounds like there is some kind of a tipping point where the network effects actually just kicks in and there's the supply showing up, there's demand monitoring up and this loop kind of like you're describing keeps helping the marketplace grow. Is there a way to think about, about that tipping point? How do you get there faster? when does it start? Have I reached it? How do founders know?

Avnish:

Well, if you, and I actually knew how to do it, we would be running a marketplace and targeting Bezos as well. But see the realities are hard. So because we can share some tips you can do liquidity. So network effects, like you said, we just discussed all you can potentially measure, but network effects cannot come without liquidity, as a starting point. Liquidity can be hacked that's the good news. So going back to the Baazee days, me personally and Suvir, we used to seed the supply. Typically, liquidity hacking starts by seeding some unique supply, where you think 10X toh pata nahi hoiga ki nahi, but one and a half, two X, three X experiences happening on the buyer side and get the fly wheel working. We used to go to fashion street and all kinds of places to take actual pictures ourselves, upload it on the internet, then go and advertise it to the buyer saying, guys come we have unique stuff over here. So I think there is some liquidity hacking. Sometimes you have to basically go back to Paul Graham's ‘do things that don't scale’ - you absolutely have to do it to get the hacking right? Or you can take the OpenTable market networks, approach, Trojan horse, reservation system, same with Practo, get it going in that way, and then add the marketplace.

The third way, which I learned from Meg Whitman, and actually put this up at eBay, She used to make A us as in the company, the category managers track null searches. There's a demand, but there is no supply. And you typically have category managers and those category managers will go there and try to get that because all you're doing is trying to increase liquidity and do the matching, right? By the way, we didn't discuss in the previous metrics one, but matching is very critical. At Ola we used to track stockouts, then you've to put it in the heat map. So you can actually automate liquidity. And the best way to do it is if you have an eCommerce and services marketplace open up that dashboard to your suppliers saying, there's no supply here. Why don't you get this done? So I think you can hack your way to it.

I tell you the biggest learning for me at least in a network effects is be careful whether you have scalable network effects or asymptotic network effects. So if you have a commoditized marketplace, let's take a classic cab hailing example, whether you got a cab in three minutes or seven minutes, it doesn't change because it's a commoditized supply. If you look at a complex supply like Airbnb, each new type of a different property is not a commodity. It actually adds to the plan. So that's the trick there, but I think that's the way in my view to hack your way to supply-side liquidity, which ultimately will get you network effects hopefully, measure your network effects, the way we discussed with vertical cohorts but then be vary, how are your network effects increasing? with scale or asymptotic.

Rajinder:

Sounds like if you get this right, that actually, it's very hard to compete with you. And I guess there are examples out there - Amazon is there.

Avnish:

Therefore, Amazon, because how do you, with the whole flywheel is working. I don't know if Amazon today if you ask me and we'll have a separate video cast on Moats, because that’s the other thing I've been thinking very deeply about. I don't know if Amazon today is really network effects or is it really economies of scale, right? It sounds more like economies of scale because each incremental seller is not adding. I think Airbnb is still a powerful, a very powerful real network effect play, but then if you look at that from before the COVID pandemic happened, I heard that booking.com was coming straight into their market and Airbnb was going straight into the other market. So there is no ultimately passage of time. How many companies in SNP 500 that were there 20 years ago are there today? So you have to just be very nimble. I heard Airbnb are trying to buy out hotels or at least, they were going full-stack. You would have these Airbnb branded experiences that they want to go straight into Airbnb property and booking is trying to come this way. So it is, I think if you get it right, it's very hard. It creates billions of value, but you're still not done.

Rajinder:

I think since you were very close to it, maybe also just on the eBay versus Amazon example, I think from your personal journey.

Avnish:

I think it was a 10X experience issue Rajinder, the eBay business model, didn’t allow for a 10X experience. You would buy and especially in India, which is why we moved, we were a marketplace we were not eBay. Auctions were 5% of our sales by the time eBay bought us, 95% was what was called fixed price, delivery model. We had to integrate with the logistics companies. I think the net of it was just the experience. It didn't scale. You would buy electronics item, we would go back and forth with the seller. You would have to figure out offline mode of payment, just the friction points in that thin stack marketplace doesn't work, which is why I think one takeaway for founders from this discussion is don't forget that 10X user experience if you generate incremental income for supply, you will have a great headstart. You will have an interesting business, but you are exposed. Somebody who provides the 10X experience for that same item will win that. And GOAT actually is a great example. So each of eBay’s verticals keeps getting taken off by some guy who comes in with this 10X experience.

Rajinder:

Is this 10X experience also your best defense against leakage because leakage is also an issue that marketplace is probably have to contend with.

Avnish:

Yeah, so probably, but I'll tell you, this I learned from Pierre Omidyar and I always remember it. So I used to, and I think you would think it's no surprise. I used to spend a lot of time personally, as the founder thinking about plugging leakage, kahaan se nikal ra hai, idhar karo, ousko maro, idhar danda maro, and obviously used to end up towards the supplier, say you're pissing off a supplier. What do you think they will do to a buyer, Right?

Then Pierre said that marketplaces actually I think he said community. He used to use the word community, this is a community. And he said, community is not a dictatorship. Community is a democracy. And in democracy, things are flawed. I still remember that. And he said, if you have 98 to 99, one approach to leakage and just to define leakage, it is a seller transacting with a buyer without involving the marketplace. Now, again, going back to that can happen in commoditized, marketplaces more versus a unique special supply each time. So he said, if you do that, your marketplace will choke, your community will choke, let a thousand flowers bloom. Let it be 80-20, let 20% leak, because what happens is, this we figured out later a seller will come on the platform, see income, get excited. Then especially in India, be very entrepreneurial and say, isko kaise bypass karein abhi. Then will bypass the marketplace. Then realize that there's a lot of headache. They are having to deal with the buyer. There's no support from the marketplace in terms of going back and forth, they start losing incremental sales because some other sellers come, remember on Amazon also the higher rated you are, the more sales you get. If you bypass the platform, how do you get ratings right? So although by the way, as an aside, Indian sellers are extremely entrepreneurial, they will bypass, then do a one rupee transaction on the site from the same buyer, to get the rating.

But I think the larger point is net-net some leakage is good. It's a democracy, it makes the overall platform grow, it’s less stress. The platform is not under stress and it lets the better, part of the human spirit come into play. And then that seller who kind of has bypassed you made some money, realizes that it doesn't work. Actually, they come back, when they come back, they are the most loyal.

Rajinder:

No, this is super helpful. I was also thinking that if I just look at the history of marketplaces, obviously web-based marketplaces were, where marketplace models started and then call it a little over a decade ago, the mobile marketplace models, kind of took off with smartphone adoption. Everyone is searching for this next big platform evolution and I was wondering whether you had any views on video, because it seems like with Zoom, with this crisis, like everyone is now just basically, and of course, you know, infrastructure with 4G - everyone is now gotten more accustomed to being online on video. Is it time for video kind of become the new platform and for more video-led marketplace models to really emerge?

Avnish:

Yeah, I mean you should weigh in because you have a view on it. I could argue it both ways because one of the lot of the elements of marketplaces are built in to or structure to get over this in-person interaction. And sometimes people prefer that, but in China, live streaming with video is also, resulting more, so you are right, I think COVID, sadly has definitely been an inflection point for video. I am also vary that it is actually a commoditization of video point. Everybody needs to have, it's table stakes, but how do you build an experience on top of that, I don't know, would it be the next big thing for sure. Remember we thought about multilingual and audio being a format that would make these things. Multilingual is a challenge because, you know, different people communicate differently. We thought maybe audio will take it to the next level. It didn't, but video probably has a better shot, but I know you have a perspective on this.

Rajinder:

I think maybe it's also a China-specific thing, but we have been seeing some of these China models just take off. And I guess their media and content ecosystem is also quite different. And there are these live streamers who have actually made it very big on multiple social platforms. And I guess that when married with marketplaces, what they realized was for a lot of long tail categories, say in passion or in beauty or gemstones or multiple other categories, there's just a, there is a role of a seller to actually sell beyond just the selection, the price, and maybe the reviews and ratings as well. There is a role that an influencer can actually play.

Avnish:

Influencer piece is very critical.

Rajinder:

India doesn't have that ecosystem today. Still very early we've seen some companies try to do it but it's a bit of trying to create this influencer ecosystem. And on top of video, all things kind of trying to happen simultaneously. I do think there is a role for this model to come through in India, but perhaps it's a little early for it as well. But I mean, I guess we are going back.

Avnish:

I think one takeaway I want all the founders to have is that this is in my view, and we do this often - if I have to start a company, or if I have to think like a founder, I think the incremental income for the supplier is table stakes. I think that 10X experience on demand is one big takeaway and focus. And the second that may, by the way, come to this video model may come through influencers, I don't know. And then this piece that are you unlocking incremental spend and how can you unlock incremental spend? We are just human beings. Human beings worldwide are in my view all the same their economic development is at different levels. So their place in the Maslow's hierarchy is different. And if one can think through, what are the untapped spends, like I’ll give you a very random example it's not implemented - space travel. It will create new spend. It can't be a marketplace, but that's where the thought has to go. There are so many rich people in the world, , I think it will be on the top of Maslow’s hierarchy somewhere on the top, because you are trying to unlock new spends or if it's in the middle, unmet needs / latent needs. But I would think very hard about it. Say, can I do that with a 10X experience generating incremental income from a supplier? I think that's the next a hundred-million-dollar company.

Rajinder:

Awesome.

Avnish:

One-point Rajinder, we didn't complete was the question often comes whether marketplaces are winner takes all or whether they are not. And I would say marketplaces are winner takes most. Let's be very clear. And if you are not, you will not do well, because if you're not being able to take a disproportionate market share, if you are 50-50, it's not a marketplace, it's a telecom company, it's a utility. You have to think about your moats very differently. People will come in with lower cost base, more capex, do something which will disrupt. If you are a marketplace and your network effects, by definition it has to be winner takes most, it’s not, winner takes all, because we distinguish between commoditized marketplaces, where network effects are asymptotic versus specialized marketplaces that are called heterogeneous marketplaces. Where network effects are not asymptotic, and it will be very close to winner takes all. Where network effects are asymptotic, which are the homogenous marketplaces, ou will see two or three players typically two, but likely three, but that will also be 70-30 maybe 60-40, something like that. Or maybe there will be a third player at 10-20%. The profit pool will go to the largest one. It won't be in the share of the market share. It'll be much bigger.

Rajinder:

Thanks Avi

Avnish:

Great discussion. I think there is more work for us to do and try to put this out in some other form, but we'll be back.

Rajinder:

Bye.

Salonie:

Thank you for tuning in and you can find the transcribed version of this podcast on www.matrixpartners.in you can also follow us on Twitter and LinkedIn for more updates.

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