As a marketplace for local services, Airtasker is often quickly bracketed with companies like Hipages, Deliveroo or Uber — but as with many things in life, the devil is in the detail and I believe that understanding the unique design of the Airtasker marketplace model is super critical because it plays a big role in determining:
- Customer experience (value proposition) that the marketplace can offer to users
- Breadth of services (market opportunity) that the marketplace can address
- Efficiency and financial sustainability (operating margins) with which the marketplace can operate
Airtasker’s Marketplace Model
Airtasker is an open, infinitely horizontal marketplace for local services.
Critical to the design of our marketplace model is that:
- We’re open so that we can bring people together in a flexible way that prioritises liquidity. We trust our community first and empower people to make their own informed decisions.
- We’re infinitely horizontal so that we can address (and create) a long tail of service industries that is much longer and more valuable than we might intuitively assume.
- We’re a marketplace that facilitates each step of an end-to-end ecommerce transaction. This enables us to build trust in our community through a system of transparency and accountability.
There are also a number of other important aspects of our marketplace design:
- We align the interests of all stakeholders (Customers, Taskers and Airtasker) through our monetisation model (only charging for successful outcomes) and incentive architecture (aligning positive marketplace behaviour with benefits and rewards for users).
- Our marketplace leverages user generated content (eg. posted tasks, listings, offers, profiles, reviews) which allows us to scale broadly and rapidly whilst simultaneously creating strong defensive moats.
- Our marketplace provides critical infrastructure such as secure payments, insurance and customer support whilst keeping operations lean and enabling financial sustainability.
Similar model, different spaces
Outside of the local services space, there are a number of similar marketplaces that share common attributes with Airtasker eg. Airbnb, Etsy and Youtube…
- Airbnb is an open marketplace for real estate
- Etsy is an open, horizontal marketplace for handmade goods
- Youtube is an open, infinitely horizontal platform for exchanging videos
Like Airtasker, each of these marketplaces is open, horizontal and built on user generated content (apartment listings, handmade good listings or video uploads) and given their massive success I believe that each of these companies present some great marketplace design inspiration :)
Different models in the local services space
In various parts of the local services landscape, there are also a number of platforms that employ different models (not all of which are marketplaces) to help customers get things done.
Let’s explore a few of these common models…
1. Lead Generation
In lead generation (or “lead gen”) models the customer starts by posting a job describing what they need done in a process which is similar to posting a task on Airtasker (which is why we’re commonly compared to these models).
However from here, the customer experience (and business model) is completely different. In the lead gen model: once a job has been submitted, the customer’s contact information becomes the product (an advertising sales lead) which is then sold to service providers. These service providers then contact the customer directly to complete a potential sale and the remainder of the customer experience occurs outside of the platform.
Some common examples of lead generation platforms in Australia, UK and US include Hipages, Service Seeking, Thumbtack (US) and Rated People (UK).
Compared to Airtasker, there are a number of key differences (certainly not exhaustive):
Customer perspective:
- Not an end-to-end ecommerce experience. Once a job has been posted, the service provider contacts the customer directly and the transaction takes place outside of the platform. Insurance and secure payments are not provided.
- Personal data is sold to service providers. The customer’s personal contact data is provided directly to the service provider which can result in unsolicited customer contact.
Service Provider perspective:
- Financial risk. The service provider is charged fees on a “per lead” basis which means that in some cases, the service provider pays a fee without gaining any value.
Platform perspective:
- Higher monetisation. Often advertising-based companies can charge more (generate greater revenue) per unit compared to marketplace models because service providers are not able to accurately attribute advertising costs to incremental value gained.
- Lower operating margins. Most advertising companies need a sales team to sell their advertising products which presents a significant additional cost.
- Less responsibility. Because the platform doesn’t manage the transaction end-to-end, customer experience issues such as cancellations or property damage are not attributed to the platform. On the other hand, positive engagement is also typically not attributed to the platform.
Overall, I believe that lead generation models are flawed because they don’t align the goals of the Customer, Service Provider and the Platform. For example, a lead generation platform is incentivised to heavily promote the Service Provider that pays the highest advertising fee (as opposed to the Service Provider that will deliver the best experience to the Customer). Over time, these misalignments add up, preventing lead generation platforms from creating an awesome customer experience at scale.
2. Classifieds and social networks
The classifieds model is the local community noticeboard in a digital format and were a huge step forward in the first internet boom of the 1990s. In the classifieds model, customers can post any job and service providers can respond to that job in any way they want. There is close to zero structure which can enable a high degree of liquidity (lots of user generated content) but also a highly variable customer experience with no trust, security or protections. More recently social networks have also built classifieds products (eg. Facebook Marketplace) with the addition of a social reputation layer which creates additional trust but still lacks a payment, insurance or customer service solution.
Key examples of classifieds include Gumtree, Craigslist and Facebook Marketplace.
Compared to Airtasker’s marketplace model the differences are…
Customer / Service Provider perspective:
- High volume of liquidity. Many of today’s classifieds and social networks have built up a huge degree of user engagement which translates into a high degree of potential user generated content and liquidity.
- No payments or insurance. Classifieds and social networks typically don’t provide a solution for insurance or payments between the Customer and the Service Provider.
Platform perspective:
- Minimal structure. To generate a high degree of liquidity, classifieds and social networks usually provide very little structure or guidance to their users resulting in a highly variable customer experience.
- No direct monetisation. To maximise engagement, most classifieds and social networks are free to use. This means that they need to find other ways to generate revenue (eg. advertising or data sales).
Classifieds and social networks typically generate a huge amount of liquidity which is valuable to users. On the other hand, the lack of important features like payments, insurance and customer service as well as considered structure (eg. fit for purpose UI and community guidelines) makes it difficult to create a strong customer experience and to iterate and improve.
3. Managed and vertical marketplaces (and “on demand” services)
In the managed or vertical marketplace model, the customer can select from a range of specific services and purchase the service instantly for a fixed price (which is why some managed or vertical marketplace are known as being “on demand”).
Once this purchase has been made, the job has now been secured by the platform who then distributes that job to one of its service providers (who are usually pre-vetted by the platform). There are certain aspects shared with marketplaces however given the level of “involvement” in the supply chain, managed and vertical marketplaces actually have more in common with an “agency” business typified by temporary recruiters (eg. Hays), software development agencies (eg. Thoughtworks) or accounting firms (eg. PWC).
Examples include Urban Company, Deliveroo, Uber and Handy.
Compared to Airtasker’s marketplace model the differences are…
Customer perspective:
- Limited range of services. In order to deliver an on-demand experience, these platforms have historically needed to constrain the scope of the services that they provide, limiting service range and flexibility.
Service Provider perspective:
- Scope and price of task determined by the platform. The platform is responsible for determining the scope and price of services which means that the service provider doesn’t get much flexibility (other than choosing whether to participate or not participate on the platform).
- Upfront commitment. The service provider is required to make upfront commitment to the platform (such as agreeing to certain contractual terms) which further limits flexibility.
Platform perspective:
- High operating costs. In order to deliver an on-demand experience, the platform usually needs to implement structure such as operations (eg. Uber conducts car inspections and interviews) and incentives (eg. Deliveroo provides courier bonuses to manage their availability and ensure delivery times are met) which can come at a high cost. These costs are often so significant that many on-demand platforms have not yet been able to prove that the model is financially sustainable.
In summary, heavily managed marketplaces can create an amazing experience for customers in specific categories such as food delivery and transport however there is a clear trade-off in terms of choice and flexibility for service providers. Through these on-demand platforms, customers can access only a limited range of services (mainly just food delivery and personal transport) and service providers get very little say in what, when and how they want to work.
Fit for purpose marketplace design
Whilst every business model has its pros and cons, I believe our open, infinitely horizontal marketplace model is fit for purpose to deliver on the Airtasker mission — striking the right balance between structure and liquidity to deliver a positive customer experience across an infinite range of services in a sustainable way.
What do you think? I’m keen to hear your comments and feedback :)
PS — this article on Sequencing Business Models, which was co-authored by Gilad Horev and Casey Winters (imo, both awesome marketplace experts) provides a broader overview of different business models extending all the way from Saas to Marketplaces and Vertical Integration. Note: within the nomenclature of this article, I would identify Airtasker as being a (lightly) managed marketplace…
PPS — this article on What’s Next for Marketplaces by Andrew Chen (A16z investor and former VP Growth at Uber) also provides a perspective on various marketplace models with a slightly different lens. I don’t agree with most of the theory outlined in this article, but it’s always valuable to stay open!
