Coping with Tension In Online Marketplaces

Coping with Tension In Online Marketplaces is a whole new ballgame. There’s alot going on right now. You must manage both sides in order to cope with the tension that these opposing sides create. This tension has created a new landscape. Because of this,
Online marketplaces is undergoing a Renaissance. This is because entrepreneurs innovate on an entirely new generation of them. Remember, the same core principles of maintaining them apply.

More specifically, I believe all of these marketplaces need to nurture and manage conditions of “perfect competition” to thrive.

A big part of managing two-sided marketplaces involves managing tensions between the two, often opposing “sides”. Typically these are consumers on one side and micro-entrepreneurs or small businesses on the other. Depending on the type of marketplace, this tension could be between buyers and sellers (eBay, Amazon etc.); reviewers and diners and restaurants and establishments (OpenTable, Yelp); hosts and guests (Airbnb); drivers & riders (Lyft, Uber); and you get the message.

These two sides are dependent on each other, however; they also have different perspectives and interests that have the potential for tension and conflict. When you add in the platform itself, which is arguably a third “side”, things can get even more tense.

Such tensions can come into play big time when the platform makes product development decisions. For example, when I started managing the eBay marketplace, it was entirely an auction marketplace that catered to secondary goods like collectibles where price discovery was very important.

But research suggested that we had an opportunity to broaden the marketplace by adding a fixed-price format that could attract more users and more categories of goods. Internally we referred to the initiative as “Buy It Now”.

The problem, however, was that the current sellers really liked the auction format: They were familiar with it and were experiencing lots of success with it. They were very concerned that introducing Buy It Now threatened to kill the “golden goose” by limiting the potential upside inherent in auctions.

One of their key concerns was that competing sellers offering the same item at a fixed price would effectively place a price cap on their auctions. Choosing to introduce this new feature threatened to alienate our core customers; I say “customers” because it’s typically the merchant side who pays most or all of a marketplace’s fees.

On top of it all, users of successful marketplaces can get quite emotional about changes, which makes the task even more difficult. At its core, this is a very good thing because it demonstrates that your users are passionate about your marketplace, but it doesn’t make managing the change any easier. And it’s particularly hard to know if the voices you are hearing are coming from a vocal minority or a vocal majority.

So what should you do when you believe introducing a new product or feature will benefit the marketplace as a
whole, but there are one or both of the sides have trouble seeing that big picture? Here are some tactics you should deploy while managing different marketplaces:

You must understand the sentiment of your users try to distinguish signal from noise.

We developed tools to calibrate sentiment, both in terms of strength of feeling (i.e., “very strong” dislike vs. just “a little”) as well as the proportion of users holding those perspectives. Ideally, these tools are dynamic so you can read community sentiment over time as you introduce new features and policies. The entire process has a number of analogies to constituency management and political polling.

You should always look for opportunities to test innovations on a subset of users if you can.

Develop avenues to get meaningful, in-depth user perspectives. One method that worked well for us at eBay was a program that we called “Voices”, which was comprised of standing focus groups that we rotated into San Jose for multiple day sessions with our product and policy people to dialog with them on issues. These helped us really develop a detailed understanding of community perspectives.

You must be very thoughtful in communicating the changes to users.

You must be be highly sensitive to their concerns. You want to straddle the fine line between talking about the benefits and spin. Leveraging data from user testing can be very helpful.

You must be willing to pull back the feature if you were wrong and if it doesn’t work as intended.

It is almost impossible to always be right when you’re innovating. Don’t get too get emotionally invested in it. However; you must monitor its impact closely and react if you don’t like what you see. And should you have to pull it back, you want to make sure that communication is transparent and exercise humility.

But as counter-intuitive as it seems, in general, marketplace managers can’t worry too much about user complaints. Many—if not most—existing users are going to resist meaningful change to their beloved platform no matter what; by default, they’re invested in the marketplace as is. Listening too closely to your users might deter you from implementing really great innovations.

Note though that none of this suggests that you shouldn’t focus first and foremost on user experience! If the product innovation is clear, easy, and/or delightful, it will go a long way. Communicating about the feature well will also help (though you have to strike a balance between announcing it vs. asking for permission).

Typically, it is recommended to handle bias development conflicts towards the consumer—the buyers, diners, guests, or riders from the examples above. This often surprises people, who then ask: “Won’t we lose the micro-entrepreneurs or small businesses?” No, because merchants go where the consumers are, and they stay if you help them grow their business.

At eBay, the hotly debated “Buy It Now” feature ended up working out more than alright. It quickly became 30% of gross merchandise volume (GMV), and today accounts for about 70% of eBay’s $83 billion in GMV. If the math is correct, then that’s just under $60 billion in annual sales!

You must remember that it’s your “job” as the manager of a marketplace to grow it. The best way to grow it is through product innovation: They can provide new “layers” on top of the marketplace “cake“. So you need to take risks in order to improve the user experience. If you don’t, then your marketplace may be popular in the short term, but won’t survive for the long-term as competitors chip away at its edges.

Steve Jobs had a powerful saying: “A lot of times, people don’t know what they want until you show it to them.” You should remember this when you’re innovating.