Keys to ascending the consumer-internet throne _ techcrunch

Market size matters. Ideas for small gardens According to our research, consumer transactional marketplaces generally can’t hit warp speed unless the total market they’re going after is worth $50 billion (yes, billion) or more. Outdoor movies nyc So while a $1 billion target market may sound great in a startup pitch deck, a much larger, $50 billion addressable market is what most companies in our index needed to create a consumer marketplace valued at $1 billion or more.

That isn’t to say they didn’t start smaller in a niche market — HomeAway with vacation homes, OpenTable with restaurant reservations, Uber with black cars. Fencing sport near me However, as they grew, they moved into adjacent but related markets that could grow their TAM (total addressable market) to more than $50 billion.

It’s important to note that the TAM rule is different for the three types of network-effect businesses. Softball games to play The social networks we studied generally operate in enormous markets in which demand for the service is almost limitless (as in all people). Online football games for pc The ad-driven marketplace companies in our index, on the other hand, are going after relatively smaller advertising markets, which are often subsets of a broader transactional market.

For example, online-review site Yelp operates in the market for restaurants, but can only command a small part of the revenue it drives, as it makes money by accepting advertising from local businesses and is not directly involved in actual transactions. Simple garden ideas Restaurant-meal delivery service GrubHub, on the other hand, takes a cut of all deliveries, which we believe is a better business model, as it’s sitting directly in the flow of a critical transaction.

Thus, even though GrubHub is facing severe competition from many players while Yelp has a quasi-monopoly, the companies have similar market caps. Drip drop taemin High-performing and valuable businesses can still be built via an ad model — look at Zillow (real estate) and TripAdvisor (travel) — but these have to nail the consumer value proposition for massive categories.

• Tip: Find a “shadow market.” One way to unlock a huge market is to find a hidden “shadow market” existing in a corner of the economy. Ancestry dna reviews Both Airbnb and Uber are great examples of this. Cbs sports fantasy football cheat sheet Who knew anyone with a spare bedroom could become a hotel, and anyone with a car could function as a taxi service? Essentially, these marketplaces unlocked new supply and demand and enabled almost-magical new behavior from consumers. Pony softball Obviously, the companies in these sectors are now reaping the rewards. Rawlings custom gloves Though not included in our index, up-and-comers exemplifying this include Rover, which has unlocked a new supply of pet boarding, and Catalant, which is tapping a new supply of consultants.

Companies serving smaller markets can still succeed — they may just need a winner-take-all monopoly to create multi-billion-dollar value. Basketball rio 2016 live Just Eat, the GrubHub of the U.K. Diy landscaping and Europe, and REA Group, the Zillow of Australia, are great examples of companies that have taken smaller markets and owned them to reach the throne.

When figuring out a business model, carefully analyze supply and demand. Basketball games unblocked To build a billion-dollar business, we think one key decision for executives of consumer marketplaces is deciding which side to charge for their service. Cbs sports fantasy football login In general, our research suggests that companies should levy a fee on the side of the transaction that is less constrained (either there are more of them in the marketplace, or the side that wants access to the service more).

For example: Airbnb, valued at $30 billion, from the onset elected to charge consumers, not homeowners, because the consumers were the ones who desperately needed places to stay in busy cities with packed (and expensive) hotels. Landscape On the other hand, early market entrant HomeAway, which was valued at about $4 billion as of its acquisition by Expedia, charged homeowners to list their properties online. Raspberry trellis plans This could be one reason HomeAway didn’t capture more of the market, despite having first-mover advantage. College softball coaching jobs Airbnb, meanwhile, captured much more housing inventory, and this allowed the company to offer a more compelling service.

Sales and marketing spending is key. Front porch designs Finally, we believe there can be a relationship between sales-and-marketing spend and network effects among the companies in our index. Georgia softball schedule Alibaba, a shining example of strong network effects, is worth $220 billion (as of December 31, 2016) and spends less than 15 percent of its revenues on sales and marketing. Sleeper retaining wall design guide But childcare and elder-care marketplace, valued at $247 million as of December 31, 2016, spends more than 48 percent of its revenues on sales and marketing. Baseball league logo Finding babysitters or elder-care is, after all, a relatively episodic need, and there is a high risk of disintermediation, yielding a marketplace with weaker network effects. Fantasy basketball team names As a result, needs to spend more on sales and marketing to maintain growth.

Overall, we believe the network effect is more relevant than ever to future startup success. Francesca battistelli beautiful beautiful But the playbook is changing rapidly. A baseball What worked to create a network effect yesterday isn’t guaranteed to “kill it” tomorrow — and savvy entrepreneurs will have to work hard to keep up. Oldest baseball stadiums Featured Image: CSA Images/Archive/Getty Images