Online marketplace platforms like AutoTrader SA as well as social networking platforms learn and focus from user interactions with the platform.
For example:
- Spotify learns from the songs that you are listening to
- Google learns from all of your interactions. Clicks, time spent, search terms, etc.
- Facebook learns from what you watch, what you look at, and what appears in your newsfeed.
- Google connects the searchers of information with the providers of information.
On many of these platforms, you get served a very unique set of content compared to everybody else. This creates the basis of value for the platform and the ability to target.
Increasing the quantity and quality of user interaction on a platform allows for fast-paced growth.
Producer vs Platform businesses
If you cast your mind back, Autotrader SA was a producer-type business that use to create and sell a physical product – magazines. While AutoTrader SA didn’t make most of it’s revenue from the cover price (which was a strategic positioning – a post for another day), it still sold a physical world product.
We had this monster of a magazine which made us a print classifeds business. (Another story for another day – Classifieds vs Marketplaces).
A two-dimensional product, tens of thousands of AutoTrader SA magazines hit the shelves of over 5000 retailers in South Africa every Thursday morning.
Print and distribution volumes and speed were AutoTrader SA’s competitive advantages.
- We distributed to most retail stores in South Africa, every Thursday without fail.
- We sold roughly 120,000 magazines by distributing 200,000 per month.
Network effects in AutoTrader SA were limited
But, in the print world, AutoTrader SA’s understanding of consumer and dealer interactions and the potential effects was limited. We weren’t an online platform business that could learn from the interactions of our users to create an even better platform for our users, serving their interests.
Example:
- AutoTrader SA couldn’t know what pages consumers were viewing,
- or when a consumer picked up the magazine from the retail store.
AutoTrader SA becomes a platform marketplace business
AutoTrader SA has now become an online marketplace platform business. We connect buyers and sellers to hundreds of thousands of cars every single month. Because AutoTrader SA has become a platform business that can learn from the user interactions (same side and cross side) this has allowed us to become more of a two-sided marketplace bringing more of the consumer car shopping journey online through that learning.
