Jan 2, 2019 · 26m · a16z
a16z Podcast | The Marketplace Rules
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of the a16z Podcast, host Michael Copeland and Andreessen Horowitz investors Jeff Jordan and Anu Hariharan analyze the structural economics, network dynamics, and growth strategies driving successful online marketplaces.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. How this is scored →
The host as informed peer 2.7 Guest teaching 5.6 Guest disagreement 1.0 The host pushing back 1.0
speaking balance: gold is the host, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 15:08 Nuancing user-driven product feedback
In a very collaborative interview, Jeff provides the sharpest contrarian view by explaining why relying strictly on community feedback can be dangerous, using eBay's internal push to introduce fixed prices despite user backlash.
Hardest push from the host ▶ 14:53 Steve Jobs counter-perspectiveMichael challenges the guest's thesis about listening to platform users by raising the Steve Jobs philosophy that consumers do not know what they want until you create it for them.
Biggest teaching moment ▶ 24:35 Inside Amazon's 3P commerce engineJeff educates the host on Amazon's corporate margin mechanics, disclosing that first-party retail growth is flat while high-margin third-party commissions drive the business.
The host holds their own ▶ 14:53 Introducing Jobsian innovation frameworkMichael demonstrates deep product design understanding by contrasting user-driven strategy against top-down Apple-style vision.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | The host as informed peer | Guest teaching | Guest disagreement | The host pushing back | Why |
|---|---|---|---|---|---|---|
| Growth of Online Marketplaces vs. E-Commerce | 2 | 5 | 1 | 1 | The host sets up the discussion by noting that online marketplaces are outgrowing traditional e-commerce, prompting the guests to explain the mechanics behind virtual scale. Jeff and Anu educate the room on how virtual marketplaces lack physical inventory governors, allowing rapid expansion. | |
| Mobile Technology as a Marketplace Enabler | 2 | 5 | 1 | 1 | Michael asks straightforward questions about how mobile technology influences buyer and supplier behavior. Jeff illustrates how technology replaces offline inefficiencies using a colorful anecdote about collecting duck decoys. | |
| Emerging Verticals and the Tools-First Strategy | 3 | 6 | 1 | 1 | The host asks how operators balance buyer and seller interests when sellers pay the bills. Jeff provides deep historical context showing how free competitors like Amazon and Yahoo failed to unseat eBay because buyers remained on eBay. | |
| Trust, Safety, Community Behavior, and Product Evolution | 4 | 6 | 2 | 2 | Michael brings up Steve Jobs to question whether platform builders should listen to users or push top-down product vision. Jeff details how eBay had to override community outrage to launch fixed-price listings, expanding the buyer base. | |
| Fraud Prevention, Identity Verification, and Payment Guarantees | 3 | 6 | 1 | 1 | Michael inquires about platform financial guarantees and fraud prevention. Jeff schools the audience on the distinction between actual safety and perceived trust, referencing battles against Eastern European cybercrime rings. | |
| High-Ticket Verticals and Amazon's Third-Party Strategy | 3 | 6 | 1 | 1 | The host prompts a discussion on high-ticket items like used cars and Amazon's overall strategy. Jeff breaks down Amazon's internal economics, pointing out that its first-party retail business is stagnant while its third-party marketplace generates most of the margin. | |
| Unbundling Craigslist and Podcast Conclusion | 2 | 5 | 0 | 0 | Michael asks about remaining market inefficiencies as the show winds down. Jeff explains how entrepreneurs are unbundling Craigslist's homepage into dedicated multibillion-dollar verticals. |
Statements from this episode (14)
Jeff Jordan: Virtual marketplaces scale faster than e-commerce due to zero physical constraints
“There are no governor or limitations on how fast most marketplaces can grow. I mean, there, it's kind of the company, most of these marketplaces are virtual. And you know, when a good idea comes in, there is just no limit to growth where e-commerce is dealing …”
Jeff Jordan: OpenTable bootstrapped its marketplace by selling software to restaurants
“OpenTable was an example of that. Early on, we sold tools because we needed to digitize the restaurant's inventory. Our entry strategy to get the restaurant, because we didn't have a network when the company started, was to give them tools. Once they had the t…”
Jeff Jordan: Buyers, not sellers, drive all value in multi-sided marketplaces
“In every marketplace I've managed, the seller paid the company, but the buyer, I believe, is where all the value is. Sellers, businesses, small businesses, aspiring small businesses, will typically go wherever they think consumers are in quantity.”
Jeff Jordan: Amazon and Yahoo's free auctions failed against eBay
“Amazon and Yahoo launch auction businesses early in eBay's life and they went for free. So every seller in the world said, I'll list, list my site there. It didn't work cause they hadn't, they couldn't get the buyers to show up there. So eBay, even though we w…”
Jeff Jordan: Raising prices damaged eBay in the long run against Google
“A lot of, it's easy to raise prices when you have a network effect, but you know, I think that hurt eBay in the long run versus Google.”
Hariharan: Overlapping supply and demand gives marketplaces a distinct advantage
“The other advantage Airbnb had, has, is the supply and the demand actually overlap, right? So, for example, I was first a customer of Airbnb, but then I was open to listing the place as well. So, only some marketplaces have that overlap effect, where you could…”
Jeff Jordan: Listening too much to early users blocks product expansion
“I mean, the, if you can listen too much to your community and community, a lot of the early community members will want to hold on to what was original.”
Jordan: Marketplaces must back safety claims with financial guarantees to build trust
“Ultimately I think the marketplace has to put their money, their mouth, money where their mouth is. If they're saying it's safe they pretty much, you know, have to get a long way towards making sure it's safe and guaranteeing it.”
Jeff Jordan: Eastern European organized crime drove early eBay and PayPal fraud
“Most of the fraud on eBay and PayPal was organized crime, typically out of Eastern Europe. Where they had incredibly talented computer science professionals who lacked a lot of commercial opportunity.”
Jordan: eBay achieved 40% to 50% operating margins
“I mean, eBay's, I think we got operating margins of 40 or 50%.”
Jordan: Service and used car sales drive all auto industry profit
“There's only two places that anyone makes money in the car business reputedly. One is service and the other is the resale of used cars. You know, new cars are the last leader to get those two businesses.”