Building a new Marketplace

[flipfilter]

Hi All,

I've recently published a post on the strategic requirements behind building a new marketplace, inspired mostly by all the brave attempts on the subject but also by many of the discussions I've had on the subject in this forum. This article became so long I've had to split it into four posts which will be up over the next few days.

I've put my all into this one in an attempt to improve the quality of my posts and not just go for the low hanging fruit (Flippa Hacked ); I respect the opinions of the people here most and would really appreciate anyone dropping by the blog and letting me know if I've overlooked anything or missed something crucial out.

Clinton - in case you're wondering, there's plenty of 'experienced people' love in part two, marketing!

Thanks in advance

Justin

[Clinton]

We have vastly different opinions about Flippa and I'm afraid I don't share your enthusiasm for the "incredible job" they're doing, don't agree with you that fraud is less likely on Flippa etc. So we do have different starting points.

But you've opened with a fantastic, well thought out post on the subject, and it would be good to see an alternate marketplace, so I look forward to seeing the discussion progress. This forum is probably a better venue for the debate, given our user-base - and we have had some threads on this before - but if you want to do it on your blog I wish you all the best with that and I've upgraded your post to a front page article.

[benitez17]

Justin, thanks for the article. Please don't take my critique below personally, since I would really like to see a better marketplace emerge and I think FlipFliter could be a great launching pad for that new marketplace, and I spent a decent amount of time analyzing this potential market myself a few months ago.

I agree with the points that you have picked out as important when building a marketplace, but the conclusions you reached seem to lead to a marketplace almost identical to Flippa, which you stated at the beginning is a recipe for failure (and is another point I agree with).

I don't really agree that it would be difficult to buy a site if Flippa didn't exist, because there are so few quality listings on Flippa, and there are so many other marketplaces out there. I've bought dozens of sites since Flippa was launched, and only a few of them were listed at Flippa.

I think Flippa did a great job of marketing and making money for their owners, but that's about it. Buyers can find better deals elsewhere, Flippa is no safer than DP or eBay (and I would argue that Flippa is actually more dangerous because they managed to convince many people that Flippa is completely safe), and the few sellers that actually have a decent site have to deal with all of the non-paying bidders after paying Flippa for the privilege.

I like your idea to focus on more established sites that aren't big enough to interest a broker, but I don't see how the decisions you reached would entice those owners to list their sites at your marketplace instead of Flippa.

[ztyler90]

Great article, something I wish I took more consideration in in the early stages or my marketplace. The big question is which model works the best, and which model would users like the most...

[tomw]

Here is someone looking for help to build a Fippa rival.

[Clinton]

Justin, I'll put a more detailed comment together for your blog when I get back to my office next week. I'm taking my son and a group of his friends trekking on Monday (school holidays, yeah! ), so it won't be till Tues/Wed.

Benitez17, I agree that Flippa's importance is over-rated, Flippa is hardly indispensible. If Flippa disappeared there would be a section of regular sellers who'd suffer, some very badly. Sellers of ebooks and courses on flipping have so many references to Flippa that they'd have to re-create their whole product. They'd suffer too, as will some bloggers. Some have zero experience of buying/selling outside of Flippa and will find their entire "expertise" is now redundant. In all likelihood Flippa closing shop will impact considerably on flipfilter.com too. None of that looks likely to happen but if it does, sites will still come to market and Flippa's absence wouldn't make the blindest bit of difference to the better sites, they'd continue to list where they are listing now - anywhere but Flippa.

The two models will need different policies but with either sitting on the fence and allowing the marketplace to self govern will not be an option.

Why on earth not? All that talk Flippa does about making the marketplace more secure, checking people's ID, blocking multiple accounts, having a feedback system etc., are only really needed at Flippa's crap end of the market where you have a few sellers making a career out of selling template sites. The skullduggery and shenanigans you get in the sub $500 market don't exist in the $100K+ market. The buyer gets professional advisers in and trusts them to do the right research, come up with the right wording for the contracts etc.

Go to the business listing sites - they sell business and online business worth in the millions and they don't concern themselves with all the touchy, feely stuff. They run successful markeplaces by limiting themselves to listing businesses - and doing that properly. They don't provide "due diligence data" (which, BTW, is spin - due diligence isn't data, it's an investigative skill); they don't try to put a numerical value to the seller's reputation; they don't care about seller ID - why is that even important, decent businesses usually have third parties like brokers doing the listing; they don't put a stamp on GA stats or try to make buyers feel more secure by integating escrow; they don't make any claim to be assisting in reducing fraud; and don't get involved in "mediation". None of that is the marketplace's concern except if they're trying to attract newbies and encouraging them to build/sell sites.

A marketplace for proper businesses doesn't need any of that; in fact it would be counter-productive to get involved in all this peripheral activity. If we had the money and were spending $500K on a site, people like benitez17, hooperman, tke71709, peterdavis, Ajeet, me, others here and the type of folk who have that kind of money would hardly use Flippa's info. We'd rely on what our own investigations revealed and we'd trust only those.

[flipfilter]

Hi,

Clinton - Thanks for your help - I know if there's anywhere to get intelligent debate on topic, it's here.

I think maybe I was a little over enthusiastic with "incredible job" but I'll stand up and appreciate what they're doing; I'm not looking at it from a buyer's or seller's perspective but purely as a cold business decision.

Anyone that's created a site which relies on critical mass (this forum for example) knows the difficulty in achieving it in the first place, yet alone managing everything else that goes with it. Please don't misplace my enthusiasm - Flippa is not perfect, but they are making a tidy gross profit per employee and that in my eyes is an admirable and efficient business.

Many people have spoke about doing the same, and only a few like Zach (blarket.com) have had the balls to actually attempt it because it's a mammoth task replicating what Flippa do, however flawed they may be at doing it.

Hi Benitez - I sort of agree you on "the conclusions you reached seem to lead to a marketplace almost identical to Flippa ...." but I'm far from the conclusion in the first post. I created the article in an order different to the order I've posted it in, and I've probably lost sight a little whilst writing it (it is seriously long!). All the same, I'm now aware not to fall into the trap of simply describing another Flippa. Where I disagree, is that I believe there are parts in Flippa that arent broken and I see little point in reinventing the wheel there.

Clinton, you've raised an interesting point about business brokers leaving DD to clients rather than undertaking the task themselves. In some respects though, a business broker will typically employee 1 employee for every 50 businesses (A very rough calculation based on HSH and RTA in Manchester). If Flippa had to do this, they would probably be running at a loss. But at the same time, if they only sold $50K and above sites, providing DD or even mediation would be redundant as very few people would risk leaving DD to a non related third party on a transaction of that size. Where I do certainly agree with you is that Flippa really shouldn't call their API-mashup of data 'due diliegence' as it is misleading.

Travis (Flipwebsites) recently left a comment on the post about self regulating marketplaces like Digital Point somehow working without external 'interference. It would be an interesting case study, but maybe there's a model C which is essentially a minimal listings only type service.

Justin

[Clinton]

Anyone that's created a site which relies on critical mass (this forum for example) knows the difficulty in achieving it in the first place, yet alone managing everything else that goes with it.

I don't believe it's as difficult as it seems, despite the fact that attempts by several people have failed - there is a huge demand for a decent marketplace to list proper web businesses without all the noise from templates.

But at the same time, if they only sold $50K and above sites, providing DD or even mediation would be redundant as very few people would risk leaving DD to a non related third party

True, but if you had to choose a cut-off point, what do you guess it would be? Do you think buyers of <$10K sites rely on Flippa info? <$5K?

I'm not looking at it from a buyer's or seller's perspective but purely as a cold business decision.

Do they even have a viable business if they stop the listing of templates? Probably not. Because they are not geared for the rest of the market.

They have a significant advantage only if you're trying to attract the customers they're after. If you're going for real web businesses, Flippa is at a serious disadvantage because they've already marked out their court and invested too much in systems and methods catering for a market that's a lot different to yours. Even their name works against them.

[benitez17]

Hi Benitez - I sort of agree you on "the conclusions you reached seem to lead to a marketplace almost identical to Flippa ...." but I'm far from the conclusion in the first post. I created the article in an order different to the order I've posted it in, and I've probably lost sight a little whilst writing it (it is seriously long!). All the same, I'm now aware not to fall into the trap of simply describing another Flippa. Where I disagree, is that I believe there are parts in Flippa that arent broken and I see little point in reinventing the wheel there.

Justin,

That's good to know. There are parts of Flippa that do work well, but I think that they leave a lot to be desired for people who want to do more than hype up turnkey sites. I think the people who have benefited the most from the launch of Flippa are Flippa's owners, which means that there is an opportunity for a marketplace that is more focused on providing a quality environment for people who own real online businesses.

I look forward to the rest of your articles.

[Clinton]

I, too, agree there are parts in Flippa that work well.

However, that a part works well is not in itself reason to include it. I look forward to the rest of the articles, and more on the parts you see as crucial.