Applico Platform Innovation Meetup Recap (Marketplaces)

By Erik Zambrano

Applico helds its quarterly Platform Innovation Meetup, Platform Journeys to Critical Mass at Grand Central Tech in NYC on December 12th, 2015. There was a fireside discussion between Applico CEO Alex Moazed and Upwork CEO Stephane Kasriel. Afterwards there was a panel discussion moderated by Applico Principal Greg Battle and featuring leadership from Managed by Q, Classpass, Stringr, and Kinnek.

 

Platform Takeaways from Upwork

Upwork is a freelancer marketplace platform used by over 1 million businesses to find talent, including software developers, writers, designers and consultants, to name a few. The company is the result of the merger between the two largest freelancer marketplaces, oDesk and Elance, and a rebrand of the merged company. Prior to merging, these companies had collectively raised $74 million in institutional capital and plan to increase freelancer revenue transacted through the platform from $1 billion to $10 billion by 2021, according to Forbes.

1) Trust your gut: “Elance and oDesk were two companies with similar backgrounds. They diverged for a bit, but they were soon competing again. They had very similar visions but not enough resources to execute on that vision independently. We were heavily advised not to do the deal. However, we went through with it and it was approved by the FTC in March 2014.”

2) Save what works, get rid of the rest: “You only know a merger is going to happen after it’s done. You can have all these discussions about what the post-merger world will look like, but the plan we had wasn’t the right plan. After months of looking at data and talking to customers, we came to the conclusion that the two platforms and its communities were different. The two platforms’ feature sets and the ecosystems were similar but their code bases were radically different; therefore, we needed to move to a single platform. We rewrote 50-60% of the code from scratch, we took the best features from each side and put them together, as well as creating new experiences that weren’t available before.

3) Rebranding is always an option: “We had a great opportunity to relaunch under a new name because it helped us move forward in becoming a new company. We felt like a new company internally, so externally we wanted to feel like a new company.”

4) Fight for liquidity: Kasriel cited improved liquidity as a major reason behind the merger. As he described, “We were looking to achieve that breadth and depth. If a customer is looking for a lawyer, accountant, data scientist, any knowledge workers, we want Upwork to be able to provide them with someone online who can chat instantly.”

5) It doesn’t get easier: Stephane warned entrepreneurs to never think that operating a marketplace was easier after achieving product-market fit, “People think that everything is beautiful after product-market fit. That’s not the case. You just have different issues. For a niche vertical marketplace, maybe they have only one  type of supply and demand. Upwork has 3,500 skills available for hire, it has a very diverse supply base. Level of talent seniority and geographical location further compound the diversity of Upwork’s talent supply.”

6) Mass-produce platform trust: “We believe in curation. We deliver trust, not long term jobs,” Kasriel says. “Our freelancers’ engagements with their clients last a few days, maybe a few months at most. Our customers don’t have time to invest in deciding whether they like the person or if they’re trustworthy. Trust is embedded in our platform.”

7) Promote your top producers: Upwork has a firm grasp on data. They know the numbers of freelancers and work requests they need to reach for their platform to operate smoothly and effectively. Stephane shared some of this math. “We have 5k freelancer signups per day,” he says. “Only 2% or 100 of those freelancers will ever get a job and only 10% of those working freelancers will become top-rated freelancers. Building the data science is paramount because it enables us to develop predictive models to help the platform identify the 2% that should get a job and then find the 10% among them that will be top producers.”

 

Platform Takeaways from Managed by Q, Classpass, Stringr and Kinnek

• Managed by Q: provides office cleaning and other smart services to help your office operations run smoothly – all managed via an iPad that’s installed for free in consumers’ offices
• Classpass: a membership program for fitness classes across multiple gyms and studios, making working out more accessible
• Stringr: new footage marketplace connecting newsroom and videographers
• Kinnek: B2B platform that allows small businesses to request and receive customized quotes from suppliers for their purchases

1) Start simple: Classpass spoke to its pricing strategy at launch. It launched with a $100 price point for unlimited access to participating gyms. Initially, Classpass kept the same price point for its other markets. While it could have differentiated its prices for different markets, based off its limited internal resources, this wasn’t a priority. Now as a more mature platform, they differentiate prices based on markets. Similarly, Stringr puts up a static geofence to govern what users get a push notification from a newsroom informing them that the newsroom is interested in footage from a particular nearby news event. This has proved successful for Stringr as they have a producer base of 11k and 800 signups a week now. While both Classpass and Stringr could have deployed more complex strategies, the focus was better served on enabling the core transaction (booking a class and submitting footage, respectively) as quickly as possible and optimizing later.

2) Improve your platform’s matchmaking capabilities: Kinnek CEO Karthik provided great insight here. His matchmaking algorithm initially paired small to medium businesses (SMBs) looking to purchase an item from a general product category with suppliers that had inventory for that general product category. As they grew and learned, they saw that additional data points like location, budget, inventory, product subcategories and other attributes would help refine matchmaking. Kinnek currently has a team of data scientists that focus on improving matchmaking because the platform’s main value proposition to SMBs is that the platform’s algorithm removes the need for these SMBs to do all the research required to find the right suppliers, which they don’t have time to do.

3) Help your producers: Stringr has a 24/7 curation team that provides feedback to producers and the video they’re uploading to the platform. By providing feedback to improve producer quality, the producers have a higher chance of financial rewards. Stringr’s producer retention goes through the roof when videographers get paid.

4) Know your launch markets: Classpass’ Michael Wolf explained to our audience the platform’s experience launching in Los Angeles. The team believed 100 participating gyms were necessary for launching a new market, a figure they secured in Los Angeles. There were ten gyms in Santa Monica, another ten in Weho, and so forth. However, the dispersed nature of Los Angeles was unique to that market. The 100 participating gym assumption wasn’t holding up in Los Angeles, Classpass needed more gyms to truly take off in Los Angeles.

5) Combatting producer churn with W2: The W2 vs. 1099 debate is very top of mind, but there is very little consensus to go around. Laura from Managed by Q provided her company’s perspective on the debate, “We decided early on, maybe 3 to 4 months in, that if we wanted top quality, we needed to be the best employer.” This meant hiring cleaners as W2 workers, which impacts their bottom line. However, Laura says that retention is higher and that Managed by Q’s service quality can be better standardized. She also highlighted that because Managed by Q is a B2B company, the tighter standardization of service positively impacts client retention.

6) Liquidity for the win!: Kinnek’s Karthik shared a great anecdote about his conversation with Angellist CEO Naval Ravikant. Naval told him to not focus on marketplace features and aesthetics, but to focus like a maniac on liquidity. Well said! Karthik explained to our audience that Craiglist’s power isn’t its feature set, it’s the fact that if you put up an ad in a random town, you’ll get hits. That is marketplace liquidity and it’s what builds stickiness and makes users come back. He then went on to explain that it’s critical to have easy to monitor liquidity metrics in place. Kinnek’s liquidity metrics revolve around a SMB asking for a quote and the platform’s ability to get that business x number of requests within a certain amount of time that are appropriate. Simple, yet highly effective.

7) Marketing a two-sided business: An audience member asked about marketing for platforms. Stringr’s Brian advised that platform operators treat both sides as independent. In the case of Stringr, getting producers to submit video footage requires a mass market strategy, the more videographers submitting video, the better. The consumer side of Stringr is newsrooms. Marketing to them requires good old-fashioned sales. Marketing a platform requires operators to shift their attention between the two consistently.

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Filed under: Platform Innovation | Topics: meetups, platform