Network Effects

Network Effects are:

• Acquisition feature

• Retention feature

• All of the above

• None of the above

Answer explanation

Viral Effects = Acquisition

Network Effects = Retention

Which of the following isn’t the network effect product? Consider this product alone

• Allegro

• Gmail

• OLX

• Masterlife

Answer explanation

Allegro = Two-Sided Marketplace

Gmail = No added value for other mail clients, no network

OLX = Two-sided marketplace with side-switching (sellers become buyers)

Masterlife - Embedded defensibility. No value for you that others use Masterlife

The ideal situation for a marketplace to exist is:

• Both the Demand and Supply sides are concentrated

• Demand is fragmented, Supply is concentrated

• Demand is concentrated, Supply is fragmented

• Both Demand and Supply sides are fragmented

Answer explanation

Both side concentrated - no marketplace. Parties can easily find each other

Both side fragmented - easiest for the marketplace to gain more power than each of the users alone. Example - OLX, Vinted lots of small buyers and sellers.

The easiest type of marketplace to build liquidity is:

• Local, differentiated

• Global differentiated

• Local, commoditized

• Global, commoditized

Answer explanation

Ideal in terms of defensibility

global, differentiated supply

Easiest to build liquidity

global, commoditized supply

It has to build only one type of supply to start transactions. Think of online currency exchange platform marketplace

If the marketplace is local and commoditized, with what combinations of features, does it nevertheless have a chance of success?

• Large Transaction Size, High Frequency

• Large Transaction Size, Low Frequency

• Low Transaction Size, High Frequency

• Low Transaction Size, Low Frequency

Answer explanation

High Transaction Size -> Higher Revenue per User -> Higher possible Acquisition Cost

Higher Frequency -> Chance to build Loyalty -> Higher Lifetime Value

What is the most crucial for the marketplace in the early stage

• Scalability

• Defensibility

• Liquidity

• Monetization

Answer explanation

Liquidity = Health Points.

No Liquidity = No Transactions = Ghost Town = Death

The highest impact on the size of the take-rate have:

• Transaction Size, Marginal Cost, Discovery, Trust

• Scalability, Defensibility, Liquidity, Monetization Method

• Differentiated supply, Marginal Cost, Non-Local, Discovery

• Transaction Size, Frequency, Network Type, Brand

Answer explanation

Transaction Size - more spend, more power, less willing to pay commision

Marginal Cost - you want pay commission > your income

Discovery - pay more for new customers, than for these you will have anyway

Trust - limits risk = decreases Marginal Cost

SaaS should be mainly used:

• To keep more concentrated side

• To keep more fragmented side

• To keep less valuable side

• To keep more valuable side

Answer explanation

Concentrated side usually = more valuable

It is possible that more fragmented side has different users, some of which are more valuable. Think Amazon Procurement Tools

SaaS enhances:

• Transaction Size and Frequency

• Supply Differentation and Globalization

• Defensibility, Scalability and Liquidity

• All of the above

Answer explanation

Defensibility - SaaS is Embedded. Hard to rip off the organization

Liquidity - accustomed to SaaS, easier to use marketplace

Scalability - lower CAC, because of added value

Which of the following are managed marketplaces

• Panek Car

• Pracuj.pl

• Fullfilment by Amazon

• Jush!

Answer explanation

Panek Car - not a marketplace car rental service. They own fleet

Pracuj.pl - not a marketplace. Interaction network. No transaction on the network

FBA - warehousing + shipment + sales

Jush! - not a marketplace -> Żabka owns supply