Marketplaces in the Age of AI

Summary

Summarized wtih ChatGPT

We at a16z have long been students of the marketplace business model.

Highlights from Article

AI isn’t (so far) opening up brand new categories. Instead, it’s reviving categories where marketplaces previously failed, turning graveyards into greenfields.

• AI is bringing back some old MP models

How? Marketplaces historically fail for one of two reasons. They may struggle to acquire converting customers, either because of a lack of demand or because making a successful match requires too much time, cost, or effort.

• Historically MP’s stufgled from a failure to bring on new customers or flagging repeat business that hit LTV

Or, they may struggle to generate enough value from these customers, either due to low repeat rates or low margins

Previously, buyers needed to be hand-held through this process by a cast of supporting characters: account managers, sales reps, and more. AI can fill this back office role by handling all communications with both sides, and keeping both sides up-to-date on the best options

• AI can help reduce friction for onboarding costs

Marketplaces can give AI superpowers to their sellers to encourage this behavior.

• Use AI to drive sell-side improvements

And AI can transform categories where buyer or seller experiences were particularly poor, opening up opportunities for a marketplace to thrive instead of sputtering along.

The highest chance of success is therefore likely to be in categories where the graveyard is filled with scale-ups, not early failures. If companies reached millions in revenue but couldn’t get past $50M ARR, that’t a problem AI can likely address.

All material owns to the authors, of course. If I’m highlighting or writing notes on this, I mostly likely recommend reading the original article, of course.

See other recent things I’ve read here.