The Missing Leak In Marketplaces

Here’s the rap on marketplaces where buyers meet sellers: Some of them leak revenue. Unicorns are looking leaky these days.

The dream is to be Uber. With a $70 billion valuation, who wouldn’t? Uber doesn’t leak. The transaction is about as commodified as it gets. Relationship adds zero. You communicate everything about the job in a few bits: from where/to where/car size. And the transaction window is tight, so there is no patience for a driver who isn’t near. This is true for the driver-side, too, because idle time equals lost earnings. (There are other reasons to not dream of being Uber.)

On the other hand, TaskRabbit and Homejoy look like marketplaces, but turn out to be more like lead-gen. Once in a while you have a need (clean my house); it can probably wait a bit while you find a good solution (sometime this week?); once the deal happens, there is a lot of set up (do I trust this person when I’m not home?; will they do things the way I like?).

So here is the leaky revenue people worry about: When I find a handyman I like or a cleaning person, I’ll stick with them. I’ll say, “Hey, why don’t you just come back next week and give me your number so I can pay you directly.” The customer saves money, the worker gets regular jobs … and the marketplaces loses its cut.

Here’s What These Folks Are Missing

The freelancer economy requires software services that make it easier for companies to find workers qualified for their freelance assignments on demand or on repeating basis; manage them through their assignments, track their results and follow up; and pay them the way they want to be paid.

Platforms take more than just matchmaking to work.

All the noise about the leaky marketplaces focuses on finding someone to do the task at the right time and place.

But getting the job done right and getting payments handled are a huge headache for folks who go “off platform” in the TaskRabbit and Homejoy world. Do you plan to text back and forth all day with the cleaner to make an appointment? Do you leave cash or checks for them?

Here’s A Marketplace That Doesn’t Leak

Take the marketplace business Zeel, which gets you a massage therapist on demand. Zeel assembles a pool of skilled and qualified talent, so when you make your request there is someone there to fulfill it. They manage it. Want to schedule in advance? Zeel handles the schedule and reminds the therapist. Somebody flakes? They backfill. This is more than just finding someone in a directory.

And don’t forget the payment. Customers get to pay through the app and the therapists don’t have to worry about checks clearing or carrying cash. The platform does push-button clearing.

Leak-proofing comes from handling all three aspects: finding someone, getting the scheduling and credentialing right and keeping the money flowing painlessly.

More Leak-Proof Models

Real estate is an example of a leak-proof model. Normally, you choose a spot and just stay there. It looks easy to dis-intermediate on the surface. Historically, the businesses here are brokers, getting paid to make a match. But the co-working operators show what a leak-proof model looks like for this: WeWork aggregates space from landlords and cuts into desks on one side, and meanwhile aggregates startups and freelancers on the other. It works because people are constantly moving and re-sizing.

This is painful for landlords to manage and easy for WeWork to umbrella under an app. So you found your spot, but managing the company’s life cycle over time and handling the torrent of monthly payments makes it a case where going off platform would be too annoying. Common and WeWork’s own WeLive may apply this to residential living. Knotel is applying it to space for bigger companies.

Hiring is another leak-proof model. Upwork (Elance/Odesk) has been the classic leaky platform for ages: ideal for a small project because you don’t yet trust a freelancer in the early stages, but tempts you to go off platform when you have a working relationship with someone.

They focus a ton on verification/quality (which GitHub lets you do directly) and payment (which PayPal, Skrill or bitcoin help you handle internationally). Compare that to the much faster growing Fiverr: jobs are smaller, change more, with the work product usually delivered inside the platform and the payment taken in advance of the job.

Platforms take more than just matchmaking to work, and this year’s setbacks for some of the gig economy companies show you where to focus: find, manage, pay.