An internet of people

Over the past few years, a bunch of web-based marketplaces have gotten popular – Etsy, Kickstarter, AirBnb, to name a few. Many of these business ideas had been tried before but are succeeding only now.

When a trend like this emerges, it’s always interesting to ask “why now?” For example, for almost a decade, entrepreneurs tried to create video sharing services like YouTube, but only succeeded when certain key dependencies – broadband, digital video cameras, a version of Flash that “just worked” – became widespread.

I asked Roelof Botha the “why now” question regarding web-based marketplaces. He said something I thought was really interesting: marketplaces depend on trust, and trust requires knowing the reputation of a prospective counterparty. Today, for the first time, you can get background information on almost any prospective counterparty by searching Google, Facebook etc. Or put more simply: we finally have an internet of people.

http://www.michaelwfrank.com Michael Frank

Interesting explanation but I think that is probably one of two or three reasons for the increase in these types of businesses.

I always assumed that the bigger factor is that with the lower price of consumer technology, particular mobile, there are more people that are highly engaged and connected to the internet and thus it’s easier to get the critical mass of people on both sides of the market necessary to make these types of businesses (e.g. airbnb, taskrabbit, zaarly, uber etc.) work.

Also, success breads copy cats so entrepreneurs are more willing to go after these long tail two sided markets and investors are more willing to fund them than in prior years.

http://www.cdixon.org chris dixon

Definitely true that more people online -> easier to get to critical mass.

I’m skeptical of the argument in your final paragraph. I think these things tend to get tried many times, you just don’t hear about the less successful ones.

http://twitter.com/pame pamela castillo

Agree with Chris regarding Long Tail / niche marketplaces. Marketplaces only work after reaching critical mass and having enough scale.
When speaking to a data scientist recently, she mentioned that ideally (as in math terms), there should only be one marketplace in order to take advantage of true scale.Of course, that is true but that doesn’t mean that niche marketplaces can’t succeed. But, for them to succeed in the Long Tail you need more than just the marketplace transaction (which is what investors are more likely looking at rather than at the marketplace as a revenue model). The ones that have succeeded also solve real problems, have a big enough niche in the market (or really passionate customers whose lifetime value exceeds the cost of acquisition) and create a community, as well as engage people 1:1. If you can prove that you can execute in those areas, then investors will fund you. Not because you’re a copycat or you’re starting marketplace for A and a marketplace for B. It’s more than just bringing people together and taking a cut.

JamesHRH

Chris – Roelof is right on the money. But there are still lots of things people don’t feel comfortable buying / doing online…….after basic trust comes the classic ‘trust but verify’ test.

A wave of transparency innovations may be just ahead?

http://www.cdixon.org chris dixon

Yes, seems like those would be useful innovations. I guess the fact that many people don’t yet feel comfortable online is a good thing – a lot more growth ahead.

http://twitter.com/El_Jager JJ Nelson

I agree. We’re going to see more growth across the internet spectrum this next decade. Let’s just hope it doesn’t end up like the last big boom did and that it instead grows healthily.

I’m very excited for all of it.
JamesHRH

Problems to solve – always a good thing!

If this is not prying, why did Roelof pop into your head, when you thought of this development (I don’t know him, FWTW)?

http://www.cdixon.org chris dixon

I just had occasion to chat with him a few weeks ago. I wanted to give him credit for the idea which is why I mentioned him even though it sounds a little humble brag.
http://www.cdixon.org chris dixon

I happened to meet with him and he said that and I wanted to give him credit for the idea…

FAKE GRIMLOCK

“HOW TRUSTWORTHY THIS PERSON?” BUTTON SOUND VERY USEFUL.

https://twitter.com/#!/benoitfallenius Benoit Fallenius

We have also learned to trust that web-based marketplaces actually work. That takes a couple of years.

Another candidate for a similar journey is maybe social-driven shopping. It has started but I don’t see it really taking off yet. How long time before it is widely socially accepted to point your friends to what they should buy? Everything is in place but changing culture takes time.

http://www.cdixon.org chris dixon

Yeah, I think there is a kind of “meta trust” if you will: people start believing in marketplaces and there are real people on the other end, even if they don’t actually go to Google/FB to check on their backgrounds.

http://www.macewan.org macewan

Enough time has passed with folks over 50 trust the Internet. That’s my take.

http://www.cdixon.org chris dixon

are people 50+ years old the key demographics of these sites?

http://www.macewan.org macewan

Their opinions would influence those using the sites – those answering this survey. I base this on listening to folks submitting to deadmule.com over the last 17 years. Last fews years the discussions are positive with regards to these folks & this latest flavor of commerce.

http://veespo.com David Semeria

I think the trust factor is more of an issue with AirBnb rather than with the other two. And, for what it’s worth, I was never really convinced by the AirBnb story anyway (this was way before the bad press).

Peter Lynch used to say “if you hear a guy talking and can’t understand why he’s rich then don’t invest in his stock.” (paraphrased).

I think the same goes for AirBnb and that other outlier, Groupon.

http://www.cdixon.org chris dixon

Yeah I think there are more factors than just trust. I tried to convey this with the word “background” but perhaps that was too subtle. On Kickstarter for example I tend to trust people, it’s more just that I want to Google to find out more about their other creative projects etc.

http://www.hypedsound.com jonathanjaeger

It also helps that people trust the Internet for making payments on a consistent basis (via Paypal, Amazon, etc.). Not that we didn’t before, but now paying for something online is a lot easier and care-free.

http://twitter.com/rohit_x_ rohit sharma

further on the theme of ‘why now’ -
From OneKingsLane to Pinterest, Wanelo, Lockerz, Stippleit, the e-commerce side of this internet of people is mediated by user’s interests. beyond trust & reputation, user’s explicit and implicit declaration of what they are interested in can now be harvested and put to work.
http://twitter.com/UrgentSpeed Jeff Stewart

Roelof Botha is right, commerce all boils down to trust. That
is why I am so excited about Lenddo. By
integrating with social media, Lenddo is providing the tools for communities to
document their trustworthiness and get access to financial services. It may not seem like a big deal here in the
US, where anyone can get an American Express card, but this is life changing in
the emerging markets, where even proving identity can prove an impediment to
commerce.
http://twitter.com/chriswaldron Chris Waldron

What is interesting about trust is people need to trust the entire ecosystem:
-safety of cc/purchasing online (utilities of the marketplaces are secure)
-marketplace has been vetted and approved both sides
-company is a brand that ppl trust and like with seamless exp online

Other factors/influences from consumer internet space:
-yelp and how to rollout markets
-meetup/etsy and how to build communities properly
-size of market using internet for discovery (more than products now)
-VC will back niches that have traction which are blossoming into platforms or multiple verticals
-great customer service exp a la Zappos
http://disqus.com Peter Mullen

And must not leave out the impact of cats
http://twitter.com/danchaparian danchaparian

Chris — I’m shared an idea (not a marketplace) that people often describe a a “simple idea.” When critiquing, they say “this is so easy. I’m sure it has been done before.” The implication is that other entrepreneurs must have built it and failed, or else they’d know about it.

I can’t find any instance of it being done before, though there are two companies building similar products concurrently. This fact indicates to me that we’re on the right track. I also think that we’re hitting on a new widespread key dependency that didn’t exist a few years ago.

Since we’re not a marketplace, I don’t think trust influences our timing. In your opinion, what else can influence this development?

http://www.cdixon.org chris dixon

In my experience it is very rare for an internet idea to not have been tried before. But whether or not it has should have very little bearing on whether you pursue it – as long as you have a good thesis as to why it didn’t work before.

FAKE GRIMLOCK

ON INTERNET, NO IDEA NEW. GOOD EXECUTION, ON OTHER HAND, USUALLY IS.

http://unystartups.com Julian Baldwin

Have you ever read the book Where Good Ideas Come From by Steven Johnson? He talks about the 10/10 rule, which states new technologies follow a similar twenty year course. The first ten years are spent figuring out how to improve the technology and the next ten years are spent gaining mass adoption. He describes how YouTube was one of the first companies to show the 1/1 rule (which on a side note is a nice example of technological telescoping). Based on what you’re saying here though, I think his analysis of YouTube might be a little different if he were to consider the entire history of online video sharing services.

http://www.cdixon.org chris dixon

I haven’t – but sounds like I should.

http://unystartups.com Julian Baldwin

I’m confident you’ll enjoy it. My favorite aspect of the whole book is how he looks at innovation from behind the lens of complexity theory. He discerns patterns present at all scales of organization and says those are the mechanisms to innovate. Overall, fascinating.

http://www.cdixon.org chris dixon

Haven’t read it, but sounds like I should.

http://scalable.typepad.com Brian Manning

Interesting post.

eBay has been doing this successfully since the 90s. In the beginning their key hurdle to success was a lack of trust among buyers and sellers. At the time, they built extremely innovative tools that helped make users comfortable that they weren’t going to get ripped off; ratings and recommendations, slick complaint process, good customer service, etc. This was critical to their success. I recall reading that as trust among users increased so did eBay’s site usage and revenue. ”Trust” was their key revenue driver.

I think in many ways eBay paved the way for smaller players (like those listed above) to enable transactions between strangers. By facilitating a very safe web marketplace where a big, public company would protect you, more and more people became comfortable dealing with strangers online. And then, when these users found that bogus transactions were extremely rare, people just began to trust people.

At one time, I had to trust eBay in order to use their site. Now I think people trust people. So the reputation of the middleman (Etsy, Kickstarter, etc.) is less important, allowing lesser known, smaller web marketplaces to begin to succeed.

FAKE GRIMLOCK

BECOME REPUTATION SYSTEM FOR INTERNET ONE OF BIG OPPORTUNITIES NO ONE CLAIM YET.
http://twitter.com/pame pamela castillo

I do think eBay has paved the way.

However, I think they are failing now because that trust is collapsing. They worked so hard to ensure sellers could not rip of buyers so much so that they lopsided the marketplace when they got rid of the ability for sellers to leave negative feedback for buyers in 2008. They forgot buyers can rip off sellers too.

Trust between sellers and eBay has also eroded. And the sellers do have to trust the company, as some make their livelihood on it. And at the end of the day, the real customer of the marketplace company is usually the seller / supplier.

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http://www.alearningaday.com Rohan

Exactly what the honchos in Hollywood and the lobbyists in the government fear.

A massive risk in terms of changing the status quo!
http://twitter.com/pkg144 Peter Gross

I have been harbouring a view for a while that delivering any excellent service is all about trust. I’ve tried to explain the model that leads up to this at http://deliveringserviceexcellence.blogspot.com/p/service-excellence-model.html.
http://twitter.com/L1AD LIAD

We’ve been thinking the same thing for quite a while.

Trust is a huge factor affecting purchasing decisions and central to collaborative consumption achieving mainstream adoption.

We’re just in the process of launching TrustRank.me. The goal being to provide a central location where buyers and sellers can quickly and easily gauge the trustworthiness of each other prior to commencing a transaction.

With new P2P marketplaces and services launching each day it makes sense for their to be a single hub where individual trust scores and feedback ratings can be combined and aggregated. Would love to discuss more if anyone is interested.

http://arnoldwaldstein.com awaldstein

Big leap to make the scale ‘trustworthy’.
Individuals are more complex than businesses. You can ask for references but at the end, your interaction with them will guide your decision.

http://twitter.com/DanRMiles Dan

Totally agree. ‘An internet of people’ is a ready-made risk-engine for anyone who cares to use it.

What you need, though, is the means and inclination to derive meaning from the masses of unstructured data that is out there. So this ‘internet of people’ is still very crude.

Big Data gets sexier every day. Never thought I’d hear myself saying that.

http://www.cdixon.org chris dixon

I agree it is crude, which of course means lots of entrepreneurial opportunity.

FAKE GRIMLOCK

WAY TO TURN INTENT AND MEANING INTO STRUCTURED DATA VERY BIG OPPORTUNITY.

ALSO VERY HARD.

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http://arnoldwaldstein.com awaldstein

Chris…True but I think it’s more than just trust.

We don’t buy from marketplaces because we can vet people through LinkedIn or whatever (even though we can).

We buy because we can engage with the seller. I think the shift is in that behavior around connections. Being able to connect supplier to consumer through a dynamic exchange is what I believe is the top tipping piece of the social commerce equation.

We want to buy and interact with people. That is possible now.

It’s an internet of people. But its more than just verifiable trust, it’s personal connections that drive it.

Connection engenders community creating comfort and commerce is the offshoot when it works.

http://www.cdixon.org chris dixon

I agree – but I would say that even if we don’t always google the person, the fact that we *could* do so has created a general feeling that there are real people online and made the whole experience feel more trustworthy.

http://arnoldwaldstein.com awaldstein

No question.

There has been a cultural shift. Not off or online specific, but behaviorally.

If transparency is a given, it changes the sense of expectation and generally how we act.

All this has opened the door for marketplaces in a slew of niches to spring up. Behavior is already there. Platforms for expression are the opportunity.

Maximilian Sandmann

I don’t think Roelof’s assessment is totally spot on.

In my opinion it has been the rising focus on “design” and “social” these last years which has enabled new platforms to lower the existing thresholds of 1.0 platforms (e.g. craigslist, ebay) for people to interact with eachother.
http://twitter.com/Alternate1985 Nick Mango

There’s actually 2 levels of trust here. The first is knowing and trusting the person you’re buying from. And if you don’t know who they are, then you must move on to the second level of trust, which is do you know and trust the platform the person is using. For instance with eBay, the answer to the first question is usually no. Therefore the only way to succeed with this platform is for buyers to know and trust the platform. Kickstarter is different though. The people who use kickstarter for funding are usually known to the people who are pledging. And the people pledging trust the platform because the people they’re pledging to, trust it. This is really trust by association. Airbnb is actually in a more difficult position than eBay was when they first started. The items they choose to provide aren’t used often and there’s rarely repeat customers from the same seller. This means trust between users can’t snowball. Not only this, but eBay gained confidence in the selling of trinkets. Airbnb doesn’t have that luxury.

Nick Mango
Limitedpressing.com

FAKE GRIMLOCK

ME, GRIMLOCK, SAY DONATORS ON KICKSTARTER NOT KNOW PERSON WITH PROJECT.

TRUST IN PLATFORM STRONG ENOUGH DO ANYWAY.

http://technbiz.blogspot.com paramendra

What is the “trust” equivalent of the internet of things?
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Anonymous

Like you, I’m puzzled by the “why now?” question – for example odrive and xdrive in the late 90s had pretty much the same model and implementation as dropbox or box.net, yet experienced a somewhat different destiny…
In my view, what explains the current boom of marketplaces is not so much trust as general user adoption of the internet: these days even my 78-year old father knows how to upload a photo and edit a form. 10 years ago using yahoo mail seemed an insurmontable challenge to him.It’s not only about critical mass of online users, it’s about critical mass of conversions/adoption
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http://www.facebook.com/profile.php?id=637991511 Julian Green

eBay and Paypal had reputations that you had to build up over time. There was no trust based on reputation from the start. That has now been supplemented on eBay and Paypal by marketplace guarantees that get things going, even when dealing with someone with no track record. The beauty of the Internet of People is that if you know who someone is, you are more likely to trust them – from the start. A warm start.
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http://twitter.com/urmann David Urmann

Its more then
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http://twitter.com/Mashinsky alex mashinsky

Some marketplace like Ebay solved this problem for over 10 years and others like Youtube don’t require trust. My view of the recent success of such concepts like AirBnb and others is the large increase in web users and mobile devices which makes it much easier to get to critical mass of buyers and sellers to create a liquid marketplace.
http://twitter.com/nuancechaser Steph Lee

And this is something that SOPA will take away. The internet is built on trust, not control. Kudos for writing this!
http://twitter.com/trustcloud TrustCloud, Inc.

Web-based marketplaces that focus on peer to peer transactions definitely need trust at the individual level, not just at the system level. A unified system of trust across platforms is essential. The more transparent our online identities are, the more likely we are to be trusted. TrustCloud is working to connect the dots between a users data exhaust to create one highly valuable online reputation metric.
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Anthony Venable

hmm interesting
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