Issue No. 138: On Facebook’s Marketplace Play

Last Word: On Facebook’s Marketplace Play

via Ben Thompson, Stratechery.com

The business potential of Marketplace is pretty straightforward: as I just noted, the initial stage will be about using Facebook’s massive userbase (i.e. potential buyers) to draw sellers to Marketplace. At first this will likely be individuals selling second-hand items (like those in Facebook’s promotional video), but I’m sure the goal is for businesses to follow. And, once sellers (both individuals and businesses) are on Marketplace, and buyers are fully engaged, Facebook will for a small fee provide opportunities to ensure listings are seen by prospective buyers. It’s a formula that Facebook has repeated again and again and for good reason: it works really well.

To that end, it’s very smart that Facebook isn’t forcing any particular type of payment or delivery mechanism on Marketplace: sure, Messenger now supports payments, but most people haven’t set that functionality up, and to require it now would introduce too much friction. That would not only make it harder to overcome Craigslists’ moat but also be counter to the disciplined and patient way Facebook has built out monetization for its various products.

As for financial impact, Marketplace has a bigger opportunity than you might think: reports suggest that the privately-held Craiglist only had $381 million in revenue in 2015, but needless to say the site hasn’t tried very hard to make more. Newspaper classifieds, on the other hand, peaked at $19.6 billion in 2000. Of course that is not a perfect comparison either — Facebook won’t succeed by charging for every listing! — but local advertising is a $100 billion business and this is Facebook’s most obvious entry point. And, if you squint, you can see this being a path into proper e-commerce.

In addition, I’m impressed with how Facebook is rolling this out: I made a big deal out of that center tab because it’s a big deal, and it’s good to see Facebook, having decided to pursue this market, not holding anything back when it comes to ensuring it succeeds. Sure, if the product fails switching that tab out will be embarrassing, but as the cliché goes better to have failed than to have never truly tried (and, if the product succeeds, I’m sure a Facebook Marketplace app will follow; it would be interesting if that center tab becomes Facebook’s de facto incubator).

See more of the issue here.

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