a16z Podcast - a16z Podcast: Building Marketplaces with the Power of Community

Episode Date: July 31, 2014

There are great examples of communities helping to grow and solidify online marketplaces. eBay in its early days certainly leveraged the power of community to bring buyers and sellers onto its platform. Today, companies like Etsy, Uber and Airbnb are turning toward community for new ideas and new customers. But how do you build community, and how do you balance the needs of the community and the needs of the business? Or to put it another way, how do you simultaneously give up control and maintain control? Andreessen Horowitz board partner Boris Wertz – who built his own community while running Abe Books – is joined by Tindie’s CEO Emile Petrone and head of engineering Julia Grace to pick apart the notion of community. Can it be engineered? How much leverage do you give your “super-users,” and for some businesses is community even necessary?

I'm Boris Wirz. I'm an early stage investor through version one ventures and also a board partner with entries in Horvitz. Today we're talking about marketplace and platforms and communities, and we've got Emil and Julia here from Tindy. So perhaps first tell me what is Tindy? Sure. So I'm Emil. I'm the founder of Tindy. And what Tindy is is a marketplace for inventions made by people like you. So we have products like drones, 3D printers, electronic components, sensors, boards for Arduino, Resby. pie and emerging electronic platforms. So who's using the site? Can you give us some examples of people coming to the site and buying? Sure. So we have anyone from hobbyists and DIY folks in their garage all the way up to,

we had an order yesterday from the Canadian government, NASA, U.S. Air Force, Google, and everybody in between. So it was an entrepreneur that built a marketplace called 8 Books, which was a marketplace for hard-to-find books that we sold to Amazon in 2008. I'm also an investor in a lot of marketplaces. And I always felt like one aspect to really differentiate a marketplace on the platform is a really strong community in building that. So tell us a little bit about kind of the aspect that community plays for Tindy on your marketplace. Sure.

So initially the site was based on building off of the Arduino subreddit and starting with kind of the Arduino community that was already emerging on Reddit and since then it's basically started to grow out from there including other electronics platforms and so what's happened is is we see the communities kind of started to kind of spread into the natural areas

of kind of this electronics movement that's happening and I think part of it's just because everyone has natural interests that are diverse and varied and people have basically started to build parts of the site for based upon their interests and different products they kind of explore those areas So when you look at other marketplaces with strong communities, who do you admire? I mean, who kind of do you look up to?

So I'm Julia. I'm the head of engineering attendee. And one of the places that we often look is at Reddit. So Reddit has a very strong, very passionate community. But one of the keys when you're building community is you have a lot of early adopters who are very highly opinionated and very excited about your product, which is fantastic. but as your product grows and evolves, then you have to reassess what's important

and what's value with our community. So although Emil mentioned, we started on Reddit and that was where the idea for Tindy was born. We now have looked at many other types of communities, for example, Airbnb to see how they form and grow community around their site, although the business is slightly different, to businesses like Etsy, Uber, yeah.

So one of the rules I learned very quickly around building a community is on the one side, you have to give up some control. I mean, it's the whole sense of community and kind of involving them. At the same time, you shouldn't lose control, right? So how do you manage that balance on the one side involving people but not losing control and handing the business over to the community? So I think for a marketplace, you kind of got a double-edged sword in a way because you have to appeal to two different sides of the audience.

It's not just one group, let's say, like Facebook or a typical social network where everyone's equal. You have two different audiences and both have different needs. So you have to look at what are the aspects that you give up control that basically ensure a good experience for the customer while also giving the freedom for the sellers to accurately describe their products, show off kind of their personality, what makes them unique, what gets people

excited about what they're doing. So for what we've done is we've got some basic things around controlling the payment, the process of distributing funds after orders have come through, as well as looking at reviews and creating a clear system for customers to get an accurate portrayal about the products and about the sellers, because at the end of the day, what we're doing is building this market for an emerging segment that hasn't ever had a community before and hasn't actually had an online audience. And so we're trying to actually build the different features and kind of the experience for an audience that actually has never had.

had an audience and has never had a platform to basically rally around. And so you have to constantly feel that out. And it's a given take where, you know, you're more controlling on one aspect, but you're more freeing on another. And so, you know, we've tried to find that delicate balance, but at the end of the day, it is going to be a given take between the needs of one, one side of the market versus the other. It's like we're driving the car, building the car, and then rebuilding the engine all while going down the highway, and we're unable to stop or even have lunch. And so I feel like that's probably a good way

to describe the experience. And also, I would add, no one has built a car before. They built similar cars, but nothing quite like the car that we're driving. And so to add to what Emil was saying, it's very important for people to feel hurt when you're building a community. And so very similar to building an engineering organization,

there are oftentimes when you need to say no and you need to push back, but as long as that channel is open and they know how to reach you through that channel, we've often found that, you know, whether it be from the early days of Tindy, Emil's doing support in the IRC to having support email,

to having forums, to having all these different avenues, you ultimately have to decide which channel is going to be best for your business. And that channel might change over time and how much attention you pay to the channel. But it's very important to think that the channel is open and it's people know that if they go to that channel that they will be heard. A response will come in a very quick amount of time.

And even if the response is something like, thanks but no thanks, they know that they are special and their voice was heard. I think to give an example on that, one thing that most communities, most websites don't do is they don't actually include the voice of the community and discussions and planning product decisions and policies.

And so one thing that we do is we actively will post ideas and questions on our forum for the community to respond to. So people can actually get their voice heard before we've made a concrete decision and basically we throw that question out to the community to see their ideas because at the end of the day, we're a small team

and we're not going to come up with the best ideas every single time for any possible outcome in any possible scenario. If we lean on the community a bit, then we've got thousands of people that can get their voice in there, which generally leads to a better outcome. You know, it's not the best idea for design decisions and crowdthink,

but many times those scenarios come up and you can at least talk through your rationale for why you think this is the best policy, this is the best plan, and everyone can basically feel like, okay, I was at least included in the discussion. I may not agree, but at the end of the day, my voice was heard, and I was there at the table. And so what we're working on right now is basically revamping our review system to continue to make that better and better.

And we threw the idea of what we're planning to do in a month's time and gave a date and let the community start to reply. So all morning I've been replying to more people on the forums about what they think we should do and shouldn't do around reviews. And sellers have their own, you know, bend on that. But customers as well think they're pretty valuable. So, you know, I was talking to, I think, a 17 or 18-year-old seller in London this morning who had his own thoughts on it. And at the end of the day, it's better for us to hear them out than to just make decisions from on high. So eight books obviously built a very powerful community.

And still to this day, I find people who are A-Book fanatics. And so given that you eventually sold that business to Amazon, before that point in time, how did you handle and grow and encourage the community and handle features like reviews and feedback? Yeah, I think in the end it really comes down to two things. clear rules and open communication channels, right? And I think one of the rules was always, you know, where, you know, everything is up for discussion, but A-Books ultimately takes the business decision. We run the business.

You know, there are certain ways of how to communicate with each other. And, you know, sometimes it gets really heated. But we try to involve, especially the sellers, as much as possible, in kind of decisions about product roadmap, up, about, you know, community rules, about business models, et cetera. Well, so always coming back and say, we need to run the business in the end. We need to take the ultimate decision. But, you know, it's a very powerful thing to have a strong community.

It's sometimes also a very tiring thing as an operator because you get all of these thousands of opinion from highly passionate people that all want to have a say in your business. So, you know, to be honest, it's sometimes also tiring and a lot of it. lot of work. So going off of that, which side of the, which audience do you lend more time and, you know, to take their voice more seriously, your super users or the generic, the generic audience? The long-tail audience. I think that's a, that's a tough question, right? I think first of all, you need to build a marketplace and a platform for, you know, the majority of users. The larger

the group is that kind of you address with what you're building, the better for the business, right? Having said that, so the super users did, that the power sellers, the super involved users, they usually have, on the one side, great input, but they might also be so passionate about it and have so radical views that's really tough to take these into account. And when you look at kind of the history of Dick, for example, I think what happened is there were, you know, dozens and hundreds of power users that took over the community and basically resisted change for the better of the business going forward, right? So I think it's just this, you know, find balance off.

You get great input from these guys, but they're probably also the most passionate about taking over and driving their own decisions, their own kind of interest into the company. Isn't there, but there's the saying that you have to find your first thousand customers or first thousand users or whatever the saying is. And early on, getting people super passionate and excited about what you're doing is essentially what you're trying to do because otherwise if they're not really excited, then they're not going to spread the word. And at a certain point, and this goes along the same with the marketplace, you have to switch

from listening to your super users to then trying to balance what's the best for the community as a whole. And it's the same with a marketplace where you have to have sellers and you have to have inventory, but at a certain point that equation flips where you then start to have to thinking about how do we then appeal to the consumer and how do we make this an enjoyable experience for them as well? And so I think that, you know, if you're building a marketplace then, generally speaking, you start with the supply and you start getting them super excited in jazz and spreading the word. But once you reach certain critical mass, you start to then, you know, spread out

and you start listening to the community as a whole. Yeah, I don't think the conflict is there in the beginning. In the beginning, everybody is super excited about a new marketplace, a new product that addresses a need, and everybody rallies behind that. I think the conflict comes once you expand from the niche to the masses. Suddenly, you might have new types of products on there that, you know, kind of the core sellers that were there early on

say, listen, you know, that doesn't belong to our community. Or you start implementing a pricing model where everything was free before and suddenly you charge, right, and people don't like that. or you need to standardize processes because that's how you're going to grow into a mass buyer market that want to have standardized shipping and standardize checkout and standardized terms and conditions, right? So I think that's where you really start to have conflicts between the power users that carried the company in the beginning on just a vision and idea and kind of some passion and then suddenly turning that into a real scalable business that addresses a much larger than the original niche market.

And that's where usually conflict starts. What is the best company you've seen handle that transition? It's a good question. I think Etsy has done a fantastic job of building a community. Having said that, because they were always focused on the handmade items, they never had the niche to masses in a large way, right? But they certainly have done a fantastic job. I think EVE in the beginning has done a fantastic job doing that.

You know, probably they lost a little bit their way as they grow bigger and bigger and kind of forgot a little bit about community along that way. But I think Etsy overall is probably the D marketplace that has done the best around a really strong community that combines both online and offline elements. Do you think the super users are the ones that tend to use the community, community features the most. Because if you look at Etsy or if you look at, you know, eBay, or you look at some of these sites that if you ask the average person walking down the street, their answer would be, you know, it's a marketplace for handmade goods or it's a marketplace for,

you know, anything that I can, you know, throw up on eBay. And behind the scenes, there's actually more to it than just a marketplace, meaning there's groups on Etsy. And if you ever hear Chad speak, he'll talk about groups being the main driver. for the passionate community as they are able to basically build these micro communities. And generally speaking, they're based in certain areas. So there's a Portland sellers group that meets up all the time. And I wonder if the way to work with the super users is to basically give them additional features, give them additional tools so that they can continue to organize that sub-community that was there at the beginning.

The normal users actually don't actually, they won't use those features. And Yelp has these as well. Yelp has forms, but, you know, the average user doesn't even know they're there and we'll never use them and doesn't even think of going there. But the super users definitely are the ones then that take those features, run with them, and it basically gives them a way to continue to self-congregate around the topics that kind of were there at the beginning and keep that initial core tight. And I think, you know, a lot of people talk about a marketplace needing community features. And it's a question of why. And I think that's probably the reason why you need

something other than just a marketplace layer for transactions and buying and selling is ultimately something for people to buy into. When you look at the fabric of social platforms in a community is, you know, the traditional social platform is always that 110 one rule, right, of 100 users, 10 are somehow engaging lightly, and then one are kind of a super user. And I think the same is true for marketplace communities. I think the interesting thing is, A, how did you different? differentiate and how do you give, you know, sophisticated tools to the super users, but also how do you actually keep the hundred kind of feeling engaged in the community without necessarily participating on a daily, weekly, monthly basis? And, you know, at books, the one thing that has had always had great effect was offline events. So we traveled a lot to cities where we met sellers that we never saw in the forums. We never really saw kind of calling in customer service.

But they came out to these events, and for that one day or for that one hour where we had a lunch, they felt like part of the A-Books community. So at what point did you start to do that? Because early on, I'm assuming there wasn't enough cash to start to do these expensive events that, you know, it may cost a few thousand dollars, but at the end of the day, cash is king, that that's an expensive idea to basically replicate across the country, globe, et cetera. at what point did you start to do that? Because there's a point where that becomes something that you want to do to start bringing the community together offline to keep that passion alive,

but you also need to be self-aware of kind of the financial situation of an early startup. So what point did the aid books really start that effort? Probably around 40 or 50 people. 40 or 50 employees? Employees, yeah. Not sellers. So probably in the lowest thousands of sellers that were active in eight books. And, you know, it costs is the one thing.

I think distraction to the business is the other one. You know, having people continuously travel. It was never kind of putting on expensive, shiny vents. You know, it can be a quick get-together for drinks somewhere in a bar or, you know, kind of a breakfast, you know, alongside a book fair that sellers attended anyway. But I think the problem is really kind of for a small startup, you know, how many people can you have on the road all the time and not distract a business? Was the people traveling and throwing the events a dedicated resource, or was this, like, the executive?

No, it was part of the seller management team, and then the executives kind of joined in as much as possible as travel it out. So one of the challenges in building Tindy is, you know, in 2014, everyone has Facebook pages, Twitter pages. Like, we're all plugged into these very social mediums where we feel a lot of pressure to do a lot of social sharing. we feel a lot of pressure to build features for our power users and this is often a kind of existential angst for us because on one hand

it's very important in the beginning as Boris mentioned to really engage with and find those power users and find those people who are going to be the advocates for your brand and the advocates for your company and are going to give you very key feedback in the beginning but then as you build more and more and more, you then are faced with maintaining a lot of those things

that you've built so far. And there is, you know, you build up technical debt and you then are faced with large challenges when you want to roll, when you want to take things away, because it's very, very difficult to build a feature. And even if a very small subset of those users starts using it, if you then remove it, you'll feel, you know, like the organ is being pulled out of the body. So is community a necessary thing for building a marketplace? Because the word marketplace implies transactions. And so how much social transactions and community building transactions should occur outside of purely financial transactions?

I think that's a great question. And I think if you look at the marketplaces today, all of the marketplaces that we've been talking about so far were founded. generally speaking, maybe 10 years ago, five to 10 years ago, Etsy, eBay, etc. And if you look at modern marketplaces, the community actually exists and interacts in a much different way. So I think that the marketplace that everyone talks about today, Uber, you don't actually have a social side to it whatsoever. The only social element is actually people saying tweet this code and you'll get free $20 or a free ride or we are. are giving away popsicles or bunnies or cats

or whatever the stunt is of the day. But there is actually no community inherent on the platform itself. And they're taking advantage of Facebook, Twitter, and the marketplace is basically using these other networks as their social avenue and actually not baking it in internally into the core experience and making it something

that is taken off of the app. So Boris, what are your thoughts on that and kind of how that's evolving? Is that a different twist? Is that the modern take on the old trend? No, I think it really depends on the type of marketplace. When you look at Uber or Lyft for that matter, in the end, it's a pretty standardized product or service that is being offered,

right, right? And, you know, for better or worse, a lot of drivers can fulfill exactly the same service at a very consistent quality, which is the promise of these services, services, right? I think when we talked about the marketplace before, Airbnb, Etsy, or Tindy, and eight books, these were all unique products. If these were unique homes or handmade products or due yourself hardware, these products were made by individual sellers with their own creativity or offered by people that have an apartment to rent out. So I think the, the sales Pseller personality matters a lot in these marketplaces, and these are creative individuals

and unique personalities behind it. So I think from that point of view, a community is much more important in this case than in a marketplace that offers a standardized transportation, home cleaning, whatever service. So then the point is, the more freedom that you give the community on the platform, then the more they should be able to express themselves and have features to congregate and build this sort of community on site. Because if you look at Uber and to what you're saying,

there is actually a level of personalization that's highly personalized because you get into someone's car, you don't know them, that experience is going to be unique every single time where you don't know what you're going to talk about with this person, you've never met them before, you're trusting that they're not going to basically kidnap you and go crazy.

but the experience that Uber presents is actually highly, highly tailored and highly controlled. So by controlling the experience to that degree, there's actually very limited amount of personalization that you can actually add to the equation. And so by doing that, they're basically saying the tradeoff is we are going to standardize the experience and you're going to get a great ride every single time, less personalized, less community less feel like you're actually buying into something that's bigger you know bigger than yourself and and that's okay because that's the tradeoff you're actually giving up yeah and i mean you look at marketplace like amazon marketplace i mean nobody there's no community per se i mean

seller go there to sell as many products as at high prices as possible and and and deliver inconsistent service right but there is no sense of community either on the buyer or the the seller side but i think you bring up an important point about when we say community we use as a broad term, but there's community meaning buyer-to-seller interaction, seller-to-buyer-interaction. There's community around buyer-to-buyer interaction, community around seller-to-seller interaction. And I think that every marketplace faces unique challenges where Emil brought up the case-in-point about Uber, but that's a buyer-to-seller community. But myself talking with Boris about his Uber ride, we're not necessarily forming community, per se,

or having discussions deep about the Uber community. It's not enhancing my ride. But when you have products that are where other sellers could benefit from knowledge transfer about the platform and also from about the products, and in addition to buyers, that's where I think things get a little bit more complicated, and that's when we have to decide what will those conversations look like?

How will they form? How should we encourage certain things? How should we de-discourage other things? What would that feature set even look like on the platform? Thanks, Emil, thanks, Julia. Great conversation about communities. Looking forward to see more things evolving over time. I appreciate you coming in today.