I was going to title this post Marketplace 2.0 (you know like software 2.0, enterprise 2.0) but I realized I dont want to create another empty bandwagon :) Anyways, last week, oDesk raised a good chunk of cash from an investor that knows more than anyone about building marketplace businesses - Benchmark. Which reminded me of one of the most important things I learned in the 2000 B2B craze.
As much as most people think that the value created by market places are from counter party discovery (aka search), capturing that value rest solely on providing transactional settlement services.
eBay.com is the exception rather than the rule. For consumer goods, the search cost of finding a business is high and the switching cost low. Thus EVERYTIME you want to buy a laptop, you will try to find someone to give you the lowest price. Thus eBay was able to build a gigantic business focusing solely on “discovery” as its main business. However, in the long run, when Google has taken over the world’s entire need for search, I would venture to guess that in 5 years, Paypal will generate over 2x the reven