Li Jin @ljin18 Consumer investing @a16z. Beijing born + Midwest bred. MBA dropout. Alum: Product @shopkick, stats & English lit @Harvard. Lifelong artist. Loves tech & corgis. Aug. 17, 2018 1 min read

1/ Another important marketplace dimension is whether supply is heterogeneous vs. homogeneous. This has huge implications on marketplace dynamics.

2/ Uber commoditized its supply side into a limited number of SKUs (X, Select, Black, etc). This standardization on the supply side supports the marketplace being able to scale quickly as drivers are able to easily plug into the network, and enables more frictionless matching.

3/ But this homogeneity also means that network effects are weaker and hit an asymptote--once there are enough drivers in an area to ensure a reasonable ETA, adding more drivers doesn't meaningfully enhance the experience as a rider.

4/ Homogeneous, ultra-fragmented supply also means it's easier for a would-be competitor to acquire a base of suppliers and build liquidity (or get suppliers to multi-tenant / participate in multiple networks e.g. driving for Lyft and Uber).

5/ Contrast this with a marketplace that has heterogeneous, unique supply, like Airbnb or Opentable. It's definitely harder to build up a large enough supply base such that users are able to find what they're looking for.

6/ But the network effects are stronger: a user is likely to go to the network with the largest diversity and number of listings, leading to a clear market winner over time.

7/ Returning to @andrewchen's point: Uber is special--the huge market + high frequency + high earning potential serve to retain both sides and make the economics work.

8/ Many of the "Uber for X" startups of yesteryear tried to aggregate homogeneous, fragmented supply for infrequent use cases, with lower AOVs that didn't provide enough value for the supply side to stick around.


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