Understanding Commoditized vs. Uncommoditized Exchange Platforms

By Nicholas L. Johnson

This week TaskRabbit announced that it is blowing up its business model and becoming the Uber for everything.

As of July, TaskRabbit will replace the old auction-based system for facilitating exchanges with transparent pricing. Now a consumer will simply be offered a choice of three different producers with a listing of their hourly prices and experience levels and will be able to order services on-demand.

This change is a step in the right direction for TaskRabbit and should greatly improve the user experience on its platform.

Still, TaskRabbit’s update has not gotten it right. It lacks control over pricing. If you look at other platforms that deal in similar services, consistent and transparent pricing is a core part of their ability to deliver seamless matching. With the competition in this space heating up, I don’t think TaskRabbit’s latest update will be enough.

TaskRabbit should move to controlled, consistent pricing in the near future because it is a commoditized services platform. The result is a much better user experience and a more seamless interaction model.

Competitors like Handybook and Homejoy have been gaining fast despite starting several years after TaskRabbit. Each of these companies recently raised large sums of money, and the last time TaskRabbit raised capital was nearly two years ago.

This puts TaskRabbit in a dangerous position. Its first-mover advantage is now all but gone, and platform markets tend to be winner take all. If it doesn’t move further in the direction of consistent pricing, I’d expect that it might not be around for very long.

TaskRabbit acts like an uncommoditized services platform in a commoditized services industry. This mistake has signaled trouble for TaskRabbit internally at Applico for a long time. Let me explain why.

Commoditized Services Platforms

TaskRabbit, along with its competitors and other successful platforms like Uber, deals in commoditized services. What makes a service “commoditized” in this context? To put it simply, the service has only a limited number of relevant characteristics that consumers care about.

Consider a job like fixing a toilet or delivering a meal. In both cases, the consumer simply wants the job done well and in a timely manner. If the platform can guarantee a certain level of quality, all that matters to the consumer is that there is someone available to fulfill a request.

As a result, platforms that offer these services should focus on matching consumers with available producers as seamlessly as possible. And the best ones do exactly that. For example, Uber’s automatic matching and even its controversial surge pricing are all about facilitating the most interactions as seamlessly as possible.

Uncommoditized Service Platforms

Compare these commoditized services to an uncommoditized service like renting an apartment on Airbnb. In this example, there are many additional characteristics that matter, such as where the apartment is located, how large it is, what different amenities it offers, if the host will be there, if it’s a full apartment or just a couch, if the apartment allows dogs, and on and on.

In this case, there are simply too many relevant characteristics for automatic matching to work well. That’s why Airbnb focuses on facilitating easy search and discovery for its users rather than automatic matching. For non-commoditized services platforms, that’s the right way to go.

But for a commoditized services platform like TaskRabbit, the auction model was doomed to fail. Both consumers and producers had to spend far too much time waiting before the service was delivered, and consumers weren’t getting any real benefit from this model compared to simple automatic matching.

To its credit, TaskRabbit recognized that the old system wasn’t working and revamped its business model, moving away from the failing auction system and replicating the on-demand model of its competitors. This change could help TaskRabbit turn around its flagging business and keep up with the new competition. But it looks like it might be too little too late.

---

Filed under: Platform Innovation | Topics: enterprise hacks, platform categories, platform thinking, platforms, Services Marketplace, TaskRabbit, UX