Have you ever wondered what goes through the mind of a sharing-marketplace CEO during the first year of operation? During that first year of growing a peer-to-peer marketplace, the CEO is often faced with the opportunities, the growth, the challenges, and the balancing act that will ultimately define whether or not the business succeeds. No pressure, right?
I recently sat down with Raad Ahmed, CEO and founder of LawTrades (a company that connects people in need with personalized lawyers) to discuss some of the highlights and observations he’s seen over his first 12 months. Here’s an edited transcript of what he had to say:
Dan Slagen: How do you think about key interactions between your users and lawyers?
Raad Ahmed: Figuring out your key interactions or set of interactions that the suppliers and consumers must repeatedly initiate in order to gain value is essential to our marketplace. One side must create value, another side must consume it, and lastly there must be some kind of curation in place to regulate the quality level so that your marketplace stays relevant. You need all three for your marketplace to function properly.
Slagen: Once you’ve established those interactions, how do you grow them?
Ahmed: For on-demand marketplaces like oDesk and 99Designs, value is created when responding to a request. But simply scaling these requests to an empty room will bring no value. It must be complemented by efforts to increase the consumption of these requests simultaneously. After achieving product/market fit, one of the first people you should hire should be a community manager to help find more supply and keep those people happy aka the B in B2C. The second person should be a growth hacker-type role that builds up your user base and creates repeat usage so you don’t have to keep acquiring new customers for each request. Both sides should participate repeatedly if they’re getting value out of the marketplace.
Slagen: How do you think about both sides of your marketplace?
Ahmed: You know that unless both sides are interacting with each other, your marketplace will provide little to no value. But do you know all the different experiences users are deriving from your marketplace? For example, with YouTube some people use it to watch cat videos while others learn guitar on it. On Airbnb, some use it to travel while others subsidize their rent. On LawTrades, some users hire their first lawyer, while others use it to supplement their existing legal counsel. Understanding all the various experiences will help you better position your product to the right target audiences.
Slagen: How can you best influence customer experience?
Ahmed: To ensure a high quality experience for users, you need to expressly encourage high quality value creations. The best marketplaces conduct in-depth background checks along with social feedback like reviews/ratings for all their professionals. Wikipedia, on the other hand, will monitor its self-editing articles so that no one is abusing those privileges in a way that would drive away users. A subpar curation process makes marketplaces noisy and over time renders them less useful. The perfect example is ChatRoulette — the platform that connected you to random people around the world over live video. As its unregulated network grew, the number of “creepy experiences” increased, which prompted many users to flee and eventually led to the demise of the business.
Slagen: Peer-to-peer marketplaces are often too broad, how do you pick your niche wisely?
Ahmed: Find an under-served market and solve a pain point. For Facebook, it was college students looking to improve their social life through real people; not fake profiles with all the noise that was happening over at Myspace/Friendster. Also, know that users like exclusivity and like-mindedness. Choosing a community with these two characteristics draws more users and helps the marketplace provide meaningful interactions that users actually care about. Finally, capture micro-communities with natural evangelists. At LawTrades, a lot of our early traction came from entrepreneurs and startups who used our service, loved the experience, and spread the word out as our marketplace expanded.
Slagen: What have been some lessons learned and/or unexpected surprises?
Ahmed: Three things have really stood out since launching LawTrades:
First: Figure out your feedback loop: For us, more demand equals more lawyers, which equals more geographic coverage/saturation. This equals more engagement and eventually lower prices, which drives more demand — and the circle continues. I think this principle applies to the vast majority of marketplaces and should be the blueprint for growth.
Second: One of the misconceptions we had about running a marketplace is that it would be all straightforward and easy once that initial chicken and egg problem of getting both suppliers (lawyers) and consumers was solved. But really, the biggest problems that needed solving surfaced once LawTrades began working and delivered value to both sides. Interactions drive success for marketplaces, not all the bells and whistles in your software.
Building the most well-engineered software will equate to nothing unless you can bring meaningful interactions on it.
Third: The network effect. It’s what every marketplace desires, but it’s pretty difficult to achieve. Network effects occur when suppliers and consumers have the same intent to connect with one another and the marketplace facilitates those connections in a seamless way. This is where clever marketing comes in to remove friction in the usage and scale the number of interactions.
Dan Slagen is CMO of HourlyNerd, disrupting the consulting industry by offering a marketplace that connects specific, top MBA alumni and students directly to businesses all across the globe.