I’d flip it (rather tongue and cheek) and say that it’s you that doesn’t appreciate market places. And here’s why.
Saying eBay (your listed comp) that can sell (almost) anything, in almost every jurisdiction with probably minimal config change, at different $ values (you can buy a server on eBay), w/ both consumer and SMB sellers, and like importantly preceded this idea and implementation by a solid (guess) 15 years and along the way was the first and many technical / tricky problems for these types of models has the same business model as a vertical marketplace is kind of baffling. Let’s ignore take rate, how does your GMV scale to within two orders of magnitude at terminal compared to eBay selling skins? And how much cash did you use to get there? Is it even NPV positive to do that without knowing the cohort behavior (I’d bet the gamers are huge repeats, but they may be less loyal to Brand vs Product than say an Etsy seller; importantly you have no idea a priori). Sure gaming TAM is probably huge, but taking OPs words as written (and being kind they can or will likely pivot) the serviceable piece of the market that relates to sort of second order entertainment derivative goods is what? (I.e. if buying the game is the gating item, and is costly like some AAA titles currently are, clearly that has to somehow impact the skin market, although obviously in some cases it can be bigger). Maybe I was poor as a kid but a $70 entry price to a given market would have been debilitating to remaining disposable income. Maybe that’s changed (higher allowances or greater income variability growing those cumulative available $s for transaction).
Maybe I’m an idiot but if you put on a table 4 cards, each with the unit economics of each transaction and the cumulative economics of that “customer” as defined between your stated: eBay, poshmark, Etsy, and a business deriving value on partially the disposable income of minors in sort of fuzzy space that albeit is probably exploding.... from a distance the established ones sure look a lot better (but of course that’s survivorship bias vs a early high growth startup with unknown potential).
I’ve seen the economics of some of the booming gambling/online casino/sports betting businesses that are trendy now due in part to deregulation. Leaving aside the customer acquisition cost discussion (go check what fan fuel is spending per customer in the initial US deregulated states), and the compliance overhang will always at least somewhat drag on economics. It simply has to. This is sort of anecdotal and based on a podcast, but Coinbase has what seems to be a very large legal team; obviously not identical models but I can’t see PayPal having that many attorneys on staff. Ceteris paribus the lower complaisance overhang has to at least somewhat be a drag on margins.
Net Net, businesses are different, people are different, industries are different ...everything is different at a deep enough level. You can like some but not all marketplace businesses based on how they operate and the strategy they take and how mature/captured the underlying market is IMHO.
Thanks for your thoughts - you cover a lot of land:)
I sense a bit of apples and bananas here comparing a newly started vs super incumbents (that were once small too in markets that likely didnt make sense for everyone at the time:))
We think the skin markets deserve something similar to Coinbase for crypto -> a place where I can trade with full confidence, it's easy to use and has what I am looking for.
100% not fair. Good catch! And deeper I wondered if the comparison example really broke in terms of the “sidededness” of the market or whatever the term was in the (AndersonHorowirz linked?) book on evaluating marketplaces.
If anything the “manual” feel of the minors onboarding looks so much like AirBnb, etc, you have to wonder if the company is sort of bound to succeed due to start.
Good luck on your ramp!
Is there a to email/contact you privately? I have a case study that’s very very close in big famous investor funded adjacent market that went sideways due a tiny detail; it’s public but would be more considerate to talk 1 on 1.
Saying eBay (your listed comp) that can sell (almost) anything, in almost every jurisdiction with probably minimal config change, at different $ values (you can buy a server on eBay), w/ both consumer and SMB sellers, and like importantly preceded this idea and implementation by a solid (guess) 15 years and along the way was the first and many technical / tricky problems for these types of models has the same business model as a vertical marketplace is kind of baffling. Let’s ignore take rate, how does your GMV scale to within two orders of magnitude at terminal compared to eBay selling skins? And how much cash did you use to get there? Is it even NPV positive to do that without knowing the cohort behavior (I’d bet the gamers are huge repeats, but they may be less loyal to Brand vs Product than say an Etsy seller; importantly you have no idea a priori). Sure gaming TAM is probably huge, but taking OPs words as written (and being kind they can or will likely pivot) the serviceable piece of the market that relates to sort of second order entertainment derivative goods is what? (I.e. if buying the game is the gating item, and is costly like some AAA titles currently are, clearly that has to somehow impact the skin market, although obviously in some cases it can be bigger). Maybe I was poor as a kid but a $70 entry price to a given market would have been debilitating to remaining disposable income. Maybe that’s changed (higher allowances or greater income variability growing those cumulative available $s for transaction).
Maybe I’m an idiot but if you put on a table 4 cards, each with the unit economics of each transaction and the cumulative economics of that “customer” as defined between your stated: eBay, poshmark, Etsy, and a business deriving value on partially the disposable income of minors in sort of fuzzy space that albeit is probably exploding.... from a distance the established ones sure look a lot better (but of course that’s survivorship bias vs a early high growth startup with unknown potential).
I’ve seen the economics of some of the booming gambling/online casino/sports betting businesses that are trendy now due in part to deregulation. Leaving aside the customer acquisition cost discussion (go check what fan fuel is spending per customer in the initial US deregulated states), and the compliance overhang will always at least somewhat drag on economics. It simply has to. This is sort of anecdotal and based on a podcast, but Coinbase has what seems to be a very large legal team; obviously not identical models but I can’t see PayPal having that many attorneys on staff. Ceteris paribus the lower complaisance overhang has to at least somewhat be a drag on margins.
Net Net, businesses are different, people are different, industries are different ...everything is different at a deep enough level. You can like some but not all marketplace businesses based on how they operate and the strategy they take and how mature/captured the underlying market is IMHO.