How marketplaces win: Liquidity, growth levers, quality, more | Benjamin Lauzier (Lyft, Thumbtack)

Ben’s background (0s)

• Ben worked at Thumbtack as VP of product and growth, where he restructured the product team and growth strategy. (46s)
• At Lyft, Ben was the 30th employee and led product and growth for the driver's side of the business, achieving a milestone where 1% of US workers drove for Lyft monthly. (1m0s)
• Currently, Ben advises Marketplace teams and founders, teaches at Reforge, and founded a healthcare company called "nura" that assists users in navigating the US healthcare system. (1m10s)

Defining a marketplace (2m24s)

• Marketplaces are intermediaries that facilitate the exchange of value between two or more distinct sides. (3m48s)
• Marketplaces can range from unmanaged (e.g., Craigslist) to semi-managed (e.g., Lyft), depending on the level of intermediary involvement. (4m0s)
• A key characteristic of a marketplace is that the company does not own the supply, unlike traditional businesses that sell their own products or services. (7m2s)

Challenges in building a marketplace (7m52s)

• Founders often get caught up in complex marketplace dynamics before achieving product-market fit. The focus should be on the core value exchange and growth strategy for at least one side of the marketplace. (8m46s)
• When choosing a side to focus on, identify the more challenging side to grow. For instance, Thumbtack found it easier to find service professionals (supply) than to attract customers (demand). (9m42s)
• One approach to jumpstart marketplace growth is to leverage existing platforms where one side is already present. For example, Thumbtack initially utilized Craigslist to source service providers. (10m53s)

Methods for growing supply (13m28s)

• Several tactics exist to grow the supply side of a marketplace, including jumpstarting one side with financing and leveraging job boards. (13m45s)
• Building value-added services early on is a core way of retaining supply. (14m7s)
• Converting your supply into demand or demand into supply can be successful. (14m31s)

Understanding marketplace liquidity (15m57s)

• Liquidity in a marketplace context is the efficiency with which buyers and sellers can be matched on a platform. (17m0s)
• A key metric for understanding marketplace liquidity is the "fill rate," which represents the percentage of users who, having demonstrated intent to make a transaction, actually complete it. (18m31s)
• While fill rate is an important overall measure of marketplace health, a more actionable metric is a "market health metric," which is a leading indicator of fill rate, such as the estimated time of arrival (ETA) in ride-sharing platforms. (19m9s)

Identifying product-market fit in marketplaces (21m36s)

• Product-market fit can be determined independently of marketplace dynamics. (21m54s)
• Product-market fit should be measured for both the supply and demand sides of a marketplace. (22m53s)
• Marketplaces face similar challenges to non-marketplace businesses, with the key difference being the need to address these challenges for both the supply and demand sides. (23m42s)

Evaluating marketplace business models (24m10s)

• Marketplaces are suitable for business ideas when there is high fragmentation of both buyers and sellers, indicating a long tail without dominant players controlling the market. (24m50s)
• A relatively uniform set of needs among buyers and sellers, allowing for a degree of commoditization in supply, is another indicator of a suitable marketplace model. (25m2s)
• A significant barrier or complexity in the matchmaking process, making it difficult for buyers and sellers to connect and vet each other independently, presents a strong opportunity for a marketplace to add value. (25m57s)

Common pitfalls and failures in marketplaces (27m20s)

• Marketplaces can fail if they do not achieve sufficient liquidity, which refers to having enough density of buyers and sellers to create a positive feedback loop. (33m25s)
• Another common reason for marketplace failure is neglecting one side of the market, often the supply side. (33m38s)
• Marketplaces can also fail if they do not maintain quality control and curation, as a lack of intentionality regarding quality can lead to a poor user experience. (34m52s)

Managed marketplaces and quality control (36m23s)

• Marketplaces often face a challenge in maintaining quality due to not having direct control over the supply of goods or services offered. (36m33s)
• While having complete control over supply might seem ideal for quality control, it transforms the business model into something other than a marketplace. (37m10s)
• One approach to improving quality without direct control involves setting clear quality standards, providing coaching and tools to suppliers, and addressing gaps with more hands-on tactics. (39m37s)

Lyft’s rental car initiative (42m26s)

• Lyft partnered with General Motors to create a rental car program to address a driver shortage. (42m52s)
• The program provided Lyft with a new source of drivers and gave individuals without cars an opportunity to earn income. (43m31s)
• The program was successful, growing to become the fourth largest rental fleet in the US and increasing driver loyalty and engagement. (45m23s)

Mentorship and ambassador programs (46m35s)

• Lyft implemented a mentorship program where top-performing drivers, referred to as mentors, were paid $35 to onboard new drivers. (49m0s)
• This program provided several benefits, including efficient driver activation, scalability, and improved driver retention. (50m11s)
• The mentorship program enabled Lyft to expand its market presence at a much faster rate while utilizing fewer resources compared to its competitor, Uber. (51m10s)

Driver recruitment strategies (51m21s)

• Lyft created a program where experienced drivers mentored new drivers, which resulted in higher driver quality and lower recruitment costs. (51m38s)
• To address driver drop-off during the onboarding process, Lyft hired a team of account executives and later introduced a "recruiter" role where existing drivers could earn money by assisting new drivers with their applications. (52m16s)
• This driver recruitment strategy helped Lyft smooth out supply and demand fluctuations by providing drivers with an alternative way to earn money during low-demand periods. (53m46s)

Lyft vs. Uber: a strategic analysis (54m12s)

• Lyft's vision was always centered around transportation and changing how people move around in a city. (55m51s)
• Lyft focused on ride-sharing and public transportation alternatives, while Uber diversified into food delivery, goods transportation, and other logistics services. (56m23s)
• The COVID-19 pandemic negatively impacted Lyft's business due to its focus on shared rides, while Uber's diversified business model allowed it to rebound more quickly. (56m26s)

Cultural differences in tech: Europe vs. U.S. (59m24s)

• Product management has grown in Europe, but the market dynamics differ from the US, with a less liquid and dynamic market leading to less ownership and accountability for product managers. (1h0m24s)
• European startups tend to wait longer before hiring product managers, the recognition of product management as a craft is different, and there is a greater reliance on outsourcing product development to studios. (1h1m53s)
• Equity is less meaningful in France, with most product leaders considering their equity to be virtually worthless and representing a smaller portion of their total compensation compared to the US. (1h3m8s)

Building a health advocacy platform (1h10m30s)

• An individual's wife had an undiagnosed medical condition that led to the creation of a platform to assist people with navigating the healthcare system. (1h11m37s)
• The platform connects individuals who have complex medical conditions with health advocates who are available at any time to assist them with their healthcare needs. (1h14m26s)
• The platform, called Nura Health, focuses on providing support and advocacy for patients and may incorporate a marketplace component in the future. (1h16m0s)

Lightning round and final thoughts (1h16m52s)

• Three book recommendations are given: Misbehaving by Richard Thaler, Range by David Epstein, and Immune by Philip Dettmer. (1h17m12s)
• A recent favorite product is the Arc browser, which has an impressive onboarding experience. (1h19m26s)
• The speaker enjoys mountain biking and was impressed by the French BMX team's performance at the Paris Olympics. (1h21m6s)