Zaarly Shutters Its Reverse Craigslist Marketplace, Goes All In On Virtual Storefronts As Co-Founder Exits

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Bring On The Platform Wars!

When Arrington first introduced the world to the concept of Zaarly two years ago, my first thought was “a fast, mobile way for me to request booze delivery on demand? Sign me up.” But my second and third and so on were: “Wait, why should I trust a stranger to do the job and actually show up? Isn’t this akin to a marketplace specializing in herding cats? Do I even like cats? Hello? Where are my pants?”

For those unfamiliar, Zaarly began as a mobile-focused “reverse Craigslist” service — in other words, a peer-to-peer marketplace in which local buyers could request nearly anything from local sellers. And people seemed intrigued. Smart people. After winning LA Startup Weekend, Zaarly almost immediately raised $1 million from a long list of notable investors (even “Steve jOBS”), and then raised $14 million more before the end of the year in a round led by Kleiner, while adding Meg Whitman to its board.

Fast forward to today and you’ll no longer find Zaarly’s marketplace on the web. And, with the next update to its mobile app, co-founder Bo Fishback tells us, its “request anything” model will disappear from the Zaarly experience completely. That means, not only has the concept with which it raised $14 million been put to bed in order to move in a new direction, but we’ve also learned that Zaarly co-founder Eric Koester left the company around the same time. (It also means no more this.)

Both Fishback and Koester say that the departure was amicable and “for the best,” but understandably a change of direction and the early whiff of attrition don’t exactly a success story make, so to speak. But the truth may be just the opposite — if not slightly more complicated.

The co-founders would prefer not to see Zaarly’s change of direction as a pivot — after all, “pivot” is a dirty word in Silicon Valley, often a synonym for “failure” — but they also have good reason for that.

Lately, TechCrunch has received tips from Zaarly users informing us that the service is no longer available on the web. In fact, that’s been true for a few weeks now, as the startup blogged about it in February (though it will be news to most that “Request Anywhere” will be gone completely by the end of the month). But, really, as some already know, the shift started back in September — with the launch of “Storefronts” for Zaarly sellers.

Just as it sounds, Zaarly’s new Storefronts provide local merchants or sellers with customer-facing websites that allow them to showcase (and sell) their goods and services, essentially leveraging the Etsy (and Shopify) model(s). Now, instead of enabling users to request anything and everything, Zaarly enables its merchants to offer relative certainty (of identity, inventory and delivery, for example) and proactively market their products to customers, receive orders, payment, confirm details, and so on.

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In fact, Fishback tells us that the decision to drop the peer-to-peer model and focus exclusively on its merchant product was the result of a number of stressful, white-knuckled internal conversations that took place over months. Coupled with metrics on the original marketplace, it became increasingly clear that the new direction was necessary.

The founder still remains hopeful that the “request model” can be integrated into the new platform, but the hard truth is that its original concept was just more of a feature than a service, or a real business. Fishback scribed a pretty excellent response on Quora to the question of why Zaarly pivoted in September (when they launched Storefronts), which is a must read. But his answer is telling in terms of how the experimentations with the request marketplace informed the new direction.

While some predicted that the “request model” of Zaarly’s P2P marketplace would make it difficult to establish a significant level of trust (and quality), Fishback tells us the real issue was actually one of certainty. A startup doesn’t enter the market with the trust of an established brand or guaranteed supply, so that a pure request model “is like going fishing in a black water pond,” he says. If you don’t know if there are any fish in the pond, or what kind of fish are there, why would you fish? (Well, you might, but only if you also enjoy herding cats. Or you’re a friend of misquoted Thoreau.)

In his Quora post, Fishback explains that, in a marketplace like this, startups can either try to guarantee supply for certain services or recommend/surface items that they know have plenty of supply or show off the supply they do have. Zaarly chose to do the latter, but highly empowered buyers are in short supply, and the request model only worked for “a small segment of buyers.”

Screen shot 2013-03-08 at 7.49.13 PMInstead, they found that the key was to show off the most talented sellers, and in designing its new direction, Zaarly started with those who were the most active and popular sellers. To guarantee quality in its new marketplace, the startup handpicks from an applicant pool, using a dozen different touchpoints when vetting candidates. Most just do a background check, but Fishback says that these sellers need to have a number of referrals, and need to have reviews up and running on the site.

The startup spends time interviewing them, getting to know them, because it wants to help them build sustainable online businesses, and if sellers aren’t responding promptly, can’t demonstrate an existing network (and three or four referrals) or the ability to sell quality items, then it declines. It’s a high-touch way of vetting candidates, not the same as just filling out a short online form and getting up and running in 15 minutes. Zaarly has an editorial team that helps sellers create the text in which they describe their goods or services, and, taking a page from the Airbnb model, sends a photographer to take photos of their products.

Over time, it wants to reduce the amount of involvement in the process, but, at the outset, high-touch curation guarantees quality. Fishback says that its “request model” (while once did $1 million in transactions in a month) in the end only had a 10 to 20 percent close rate, but with its Storefronts, that has flipped to over 90 percent. The other incentive for sellers is asking them what they want to make from their products and does its best to guarantee that. Using an eTail markup, if they want to make $200, Zaarly includes its own 10 percent fee and lists the item for $220.

Today, Zaarly has over 750 merchants on the platform, offering everything from custom meals (and delivery) and home service and repair to custom speakers, music lessons and event planning. So, like Etsy, a large portion of Zaarly’s sellers are women (70 percent), but, unlike Etsy, the platform isn’t just offering homemade, handcrafted goods — although that’s a part of it.

Screen shot 2013-03-08 at 7.23.08 PMSellers are now making between $1,500 and $2,000 per month on average, with the highest grossing doing between $6 and $7,000. The idea is to provide the world’s hobbyists who have a particular talent, something they’ve been doing for years, and give them a supplemental revenue stream – help pay their rent. Fishback said that some are already quitting their jobs to manage their storefronts full-time, and that’s the startup’s end goal for all of them.

There’s still a long way to go, but the founder says that it was almost relieving to be able to focus on one thing, especially since the new marketplace is growing in a way the initial idea wasn’t. He thinks this one is much closer to finding product-market fit. Going forward, the next steps for Storefronts are to add more management tools for sellers, in the way that Groupon has been doing for its merchants, whether it be inventory management tools, scheduling or sharing tools.

Storefronts have launched in San Francisco, Seattle and Kansas City (where Fishback is from) and it’s about to go live in New York, with Los Angeles, Washington D.C. and Portland all potentially following the Big Apple.

As to Koester, the departed co-founder, he tells us that “While I wanted to write something very ‘Andrew Mason-y’ about leaving Zaarly, I quickly realized that I just couldn’t come up with anything that damn hilarious. I love Zaarly and the team, believe in the direction of Storefronts, but the time was right to start working on my next startup. Am excited to share more about that soon.” More in his blog post here.

It may be the end of the request-driven marketplace, or it may not. Time will tell. If Zaarly can scale Storefronts and maintain quality, there’s a chance it could make a return. After all, we’ve heard from sources that Zaarly is now doubling transactions every month and looking to raise a B round. If that’s true, Zaarly may just become the first to pivot into an eBay acquisition. Though with Whitman on the board, that could be awkward.

For more, find Zaarly at home here.