Some problems are so hard they need to be solved piece by piece

Andrew Parker had a great post a few years ago where he sketched out all the startups going after pieces of Craigslist:

Startups that have tried to go head-to-head against the entirety of Craigslist (the “horizontal approach”) have struggled. Startups that have tried to go up against pieces of Craigslist (the “vertical approach”) have been much more successful (e.g. StubHub, AirBnB).

Recruiting looks like it’s going through a similar evolution. Last-generation products like LinkedIn are broad but not deep. Everyone I know who recruits uses LinkedIn, but none of them think it has solved their recruiting problems. Now we are seeing the rise of vertical solutions that are significantly better, e.g. Stack Overflow for developers and Behance for designers (at least that’s what I believe – I’m an angel investor in both).

The benefits of focusing are: 1) you can create a dramatically better user experience when it’s tailored to a specific use, 2) you can do unscalable hacks when starting out (e.g. AirBnb paying photographers to take pictures of apartments), 3) you need far fewer users to get to minimum viable liquidity, and 4) brand building is easier when you solve a straightforward, narrow problem (e.g. “I need a place to stay this weekend”).

This pattern – horizontal first, vertical second – is common. But you need to be careful. Back in 2003-2004, there was a lot of speculation that vertical search engines would eventually take down Google. A few categories worked (e.g. travel), but Google adapted in other categories (e.g. video, news) and lots of startups suffered.


89 thoughts on “Some problems are so hard they need to be solved piece by piece

  1. Horizontal platforms, vertical products?

    My world is all big enterprise. Specific “solutions” always win over general ones. But building specific solutions on a general platform is a way to create a diversified portfolio of revenue streams that’s conceivably sustainable in the face of a lot of challenges (see what Palantir is doing).

  2. Totally agree. Although when you say platform that can mean platform as in a general technology applicable to a bunch of things, or it can be a platform in the sense that 3rd party apps can plug in. Assume you mean the former?

  3. As a dev hiring manager / dev candidate, I have not seen Stack Overflow Careers to be significantly better than LinkedIn or Craigslist. It is very expensive, and seems to have very little traffic. It also has very little integration with the rest of StackOverflow.

    The best results I’ve had have been on Indeed, Craiglist and LinkedIn, which seems to have a far reasonable flow of good candidates.

  4. Agreed. Although as Airbnb shows, what might at first seem niche can end up being a huge market. One interesting thing is that these vertical solutions can apparently grow the niche.

  5. i think CL is focused; they are focused on geography, which i think is one of the best subjects to create a social graph around. i think that is why CL is so hard to take down in spite of their hideous interface and refusal to adopt trends. eventually their failure to adapt will do them in, though i’m more bullish on CL than on most of the competitors listed, and more importantly, i think CL is vertical; chicago.craigslist.org is a vertical, london.craigslist.org is another vertical etc. connecting niche verticals is the way to go horizontal, and i think whatever emerges as the true “craigslist killer” will do a better job of connecting verticals than CL does.

  6. Airbnb still pays photographers to take pictures, and they didn’t figure it out until later on. It’s scalable because the cost of sending out a photographer is small compared to the added lifetime value of a host with photos. So that’s not a valid example of an unscalable hack.

  7. timrpeterson says:

    Why does everyone (you, PG, etc.) point out AirBnB as a model worth following? i really like the idea but the reality is virtually no one uses it nor has heard of it.

    After 5 years of existence (how long AirBnB has been around), Craiglist was a major force in all sectors of classified ads. AirBnB isn’t even close to Craiglist in its own sector.

    I wouldn’t consider being continuously, massively hyped by tech media then getting some techies renting rooms to each other as success.

  8. Zaid Farooqui says:

    You do realize that airbnb had 10M nights booked as of Jun 10? My brother used AirBnb over hotels during his honeymoon to Europe. He loved it! I know multiple friends who couldn’t be further from the tech world using AirBnb to make some extra income.

    Certainly there is hype. But there are plenty other targets you could pick before Airbnb.

  9. I wonder if this ever works in the opposite direction.

    Advertising networks tend to be vertical (video, audio, display, search, mobile, lead gen, etc.).

    Conceivably, over time, consolidation to harvest demand/inventory cross-sell synergies will build larger, more horizontal ad network players.

    Perhaps execution barriers determine when markets start horizontal in vacuums and then verticalize, or start with deeper vertical solutions that expand sideways over time..

  10. RT says:

    Great post but it looks like the large social network behemoths are wising up and cherry picking the best “features” from the vertical start-ups.

    Some recent examples:

    1. Linkedin introduced endorsements (zerply)
    2. Yelp is now displaying full menus and dish reviews (forkly,foodspotting)
    3. Twitter lauched clickable stock symbols (Stocktwits)
    4. craigslist provides a map view (padmapper)
    5. Facebook check ins (foursquare)

  11. takingpitches says:

    The craigslist point is great.

    I think the linkedin example is a different animal though. Linkedin is too focused on the resume. Behance, stack overflow, 99 designs, github, etc are talent elevation platforms.

    A lot of mileage left on that thesis.

  12. It is interesting to read your bit on LinkedIn. That is a problem for them if it continues because I understand that recruiters represent a major revenue source for them! Part of the problem of LinkedIn recruiting is that the resume as an entity will probably disappear and be replaced with the individual’s profile on the social web. Part of the problem is that people are leaving digital footprints in multiple places which is why services are trying to unify these networks.

  13. The first point is the most important of all. I strongly believe that an interface is only good enough for a few small tasks (or one major task). If you try to cram everything in a fixed screen real estate, it is going to confuse the users and thus fail as a product.

  14. As a newly minted venture capitalist (congrats, by the way), do you think the new, vertical-specific approach will create fewer opportunities for large-scale, growth capital type of businesses over the long-term? Will startups start to tackle vertical approaches whose markets are too small to justify large investments? In the case of this chart, clearly that is not the case with Airbnb, HomeAway, StubHub, LegalZoom, and Indeed coming out of it.

    But, let’s take transportation. Traditionally, you have car ownership, public transit, drivers for hire, and rental cars. Tackle any one of those and you’re talking a large market. All the newer companies are more specialized though. You have third party car sharing with Zipcar, first party car sharing with Getaround/RelayRides, on-demand vehicles for hire with Uber, ride sharing with Lyft and Sidecar, as well as better applications for buying cars (AutoTrader, Cars.com), riding public transit (HopStop), getting drivers for hire (TaxiMagic), and renting traditional rental cars (Silvercar). How many of those can reasonably succeed in a way their investors need them to?

  15. “but the reality is virtually no one uses it nor has heard of it.” – 10 million nights booked is a far cry from no one. – https://www.airbnb.com/10-million

    “AirBnB isn’t even close to Craiglist in its own sector.” – do you travel? I would never post or look on Craigslist to rent someones house. Here is a screenshot comparing Craiglist to AirBnb for a trip I am planning – http://cl.ly/image/1a1m0g310z0q

    I use both Craiglist and AirBnb all the time. We need to be careful assuming what we feel about a situation is the truth. Sure AirBnb is hyped. But look at the whole picture before you casually dismiss something. It just might be worth the hype.

  16. Hm, I’d say they are one of the few huge consumer internet successes of the last 5 years. Data + anecdotes back it up (on the anecdotal side, used by a lot of non-techie friends of mine in NYC for example).

  17. What I got from your comment is AirBnb is over hyped, and no one uses it, and it isn’t a great model for creating new markets.

    If you have evidence in support of that, share your links and we can learn together. That is what we are here for no? :)

  18. Yes, always a push and pull between incumbents and startups. Usually the startup needs to do something really hard to copy, something the incumbent can’t do for strategic reasons, or just sneak up on the incumbent.

  19. I’m sure their team is reading this thinking, “guys, we still haven’t gotten @timrpeterson:disqus’s approval on our business model.” You MUST be joking. Any reasonable adult should be able to look at the reality of how much business they are doing and see something of value. They picked a specific section of the “need a place to stay” puzzle to solve. They’ve worked on solving it and provided users a fantastic way to find that place to stay. They took what craigslist had done in a shady, back-alley way and made it beautiful and transparent. I think what Dixon is saying is there is value in understanding how the choice to focus narrowly benefits companies in verticals long since held by incumbents. I don’t know how or why someone would troll that.

  20. Well, results vary. And these are small (but fast growing) startups. But I think the broader point that for e.g. creative types like developers and designers, a list of Q&A answers or a portfolio are far more revealing than resumes. And these vertical communities provide incentives for passive candidates to show their stuff.

  21. paul_cs says:

    I agree about stackoverflow for developers, I have kept my own resume on there for a while now, as it’s clearly a better platform than linkedin to showcase ourselves as engineers.

    now, I’m hiring, and guess where I went first to post a job listing?

  22. timrpeterson says:

    just walk around any city in america, ask 10 people if they have heard of Airbnb, its guaranteed that 0/10 have

  23. timrpeterson says:

    wtf are you talking about, ask 1, 10, 100, 1000,… people in a city or many cities, it doesn’t matter, nobody has heard of it,

  24. takingpitches says:

    Hope you are right.

    The farther we move away from the LinkedIn resume and traditional recruiting the better.

    New forms of talent elevation – where people can demonstrate their talent rather than just say it – are better. Less deadweight loss in talent.

    This requires networks where talent participates but that don’t keep out authentic talent.

    When that talent intermingling is successfully enabled — like in stack overflow for its field — it provides a better way of finding, raising, and validating talent than current heuristics such as the items on a resume.

  25. RT says:

    One could argue design is “hard” but one could acqui-hire another firm to overcome it. We are reaching a point of maturity where start-ups will need to integrate A.I functionality in order to defend its value proposition.

    I wouldn’t be surprised if large, mature horizontal platforms perform competitive analysis against start-ups to look for trends, product ideas, etc. It is hard to “sneak up” on an incumbent these days.

  26. timrpeterson says:

    it can’t be a huge consumer success if no one has heard of it,

    Why isn’t Airbnb moving horizontally more quickly? Craigslist is sketchy in the same way MySpace was sketchy, yet facebook navigated that one pretty easily…

  27. I thought LinkedIn was the vertical solution for the business world?

    Stack Overflow and Behance are great for designers and developers…. but what about business people?

    For the “business professional”, I feel that LinkedIn is tailored enough and has an active user base that is reflective to the business community. How do you show something that is relatively intangible?

    I can look at your code or look at the business cards you posted, but for a traditional resume for a business person one can’t really show in-depth knowledge or skill online other then overviews of skills and time spent at jobs. That’s just how a traditional business resume works.

    If not LinkedIn, what would the vertical solution for hiring a individual with a business role look like?

  28. Andrew says:

    Not every host, just some in many cities. To verify the quality of the place. Those that are include a ‘Verified Photo’ badge.

  29. plughu says:

    Tim, YOU do the experiment. You’re the only one asserting, “i really like the idea but the reality is virtually no one uses it nor has heard of it.”

    I’ll even help out with your last point — I just asked my non-techie girlfriend who does most of the logistics for our vacations, and she hasn’t heard of it. For myself, I had heard about it from hacker news a year or so ago, but never saw a reasonable deal for any place I have travelled by myself since then.

    From the link other folks included above, it sounds like many people have used it (and probably many many more have, like me, tried to use it), and if it was written on the internet it must be true, right?

    Finally, I think you really need to look into your heart and admit it to yourself that you actually *don’t* like the idea. Otherwise you’d be more objective about their (modest but growing?) success.

  30. Something I wonder is if the bigger opportunity is actually building a horizontal solution as a tool for vertical niches to build their business on top of. I’m thinking something like WordPress’ model. Different kinds of blog verticals (blogs on different topics) on WordPress but still one broad horizontal tool powering them all. I wonder if maybe if craigslist had opened up their core software stack so other verticals could be built on top of their software? Or simply disaggregated their verticals, they wouldn’t be under so much attack?

  31. Small side point, but I’d posit that it goes vertical > horizontal > vertical, with the first two being one company and the third being a new entrant. At its start Craigslist was considered a local, purely classifieds player which was very different from the portals Excite, yahoo and altavista were all making. But CL not only broadened their coverage, the market became big enough to subdivide.

  32. petermengo says:

    Chris, are you aware of anyone going up against a big horizontal with an affiliated approach? Craigslist is nothing more then an ad network for classified ads. If someone could aggregate it’s thousands of micro-competitors and verticals under a competing single ad network infrastructure, but provide all the differentiators of the little guys, seems like there’s a real play there. Would take some pretty creative marketing, but not unthinkable.

  33. i’ve been researching this for what feels like eons now, and what i’ve found is that the vertical approach to recruiting has a lot of positives, but there’s still something missing: inclusiveness.

    why is this important?

    par example, if a creative director wants to hire a designer, Behance is great — everyone is speaking the same language and has the same base knowledge of both how the platform works and how to judge the work of the people there.

    but when the biz dev startup guy wants to hire a designer and drops by Behance for a look, he is unfamiliar with how things work, right down to terminology used, and feels out of the loop because he’s not in the niche. and while he can browse as an outsider, he can’t judge the quality of talent because he has no clue what he’s looking at and how to verify it.

    with our economy transitioning more and more to independent, nimble workers hustling outside the structure of the traditional organization, there are more and more “joe schmoe” type people looking to consult with others who have skills that they themselves don’t have. LinkedIn captures everyone but, as you’ve pointed out, its still not perfect. the niche sites have great positives if you’re in the niche, but if you want to hire a skill set you don’t have, you feel boxed out.

    something’s missing. and i’ve set out to build it.

  34. +10

    may i add, that a gap that’s still there is the ability to validate talent. most non-designers have no clue what they’re looking at when they see a behance portfolio because they don’t know how to judge design talent. hell, after rising to creative director after 8 years in the advertising / design industry, i *still* made bad hires because judging the work of others — and, more importantly, the thinking behind it and their ability to replicate it — is a tricky business. imagine throwing a technical startup founder to the wolves at behance and ask him to pluck out the designer that’s right for his business. yeah, not so fun.

    this is why i think niche sites like behance, github, etc., will function more as vertical communities, but still lack what it takes to be a reliable recruitment platform. not a bad thing at all, but there’s still a gap.

  35. takingpitches says:

    Yes, great comment.

    Validating talent is key to talent elevation platforms.

    It’s a touch problem but if you find ways to validate talent in a specific vertical and constantly get better over time, there is a lot of opportunity.

    You literally expand supply by elevating hidden talent while bringing transparency into opaque marketplaces. You can quickly use that strength to build a deep and liquid go-to marketplace for talent in that vertical.

  36. Great point. Focus on geography as a means for discovery and content creation is deeply misunderstood. After all, before social existed the local newspaper owned both.

  37. Juicefly says:

    Seems to me the title of this post should rather be “Some categories have so many jobs to be done, they need multiple solutions” (to paraphrase Christensen). Craigslist does one kind of job for real estate (free listings), Airbnb does a different job (booking engine).When Etsy used to be a startup, their job was to create a vibrant global community of artisans. Craigslist is a place for people to list all their ‘old stuff’ for sale. Behance’s job is to beautifully showcase creative portfolios in as many places as possible. LinkedIn’s job is to help professionals manage their networks. Both have moved into the recruiting market, each has its place.

    For startups, It’s not a question of whether to go vertical or horizontal but rather to ask what the job at hand is. Then the path to take is obvious.

  38. Maybe, although I’d argue many of those startups in Andrew’s picture are performing the same jobs as categories on craigslist. But I agree it’s more nuanced than a title allow for.

  39. Silverborn says:

    A great example of this push pull between incumbents and startups is Odeo / Apple which, of course, lead to Twitter.

  40. Silverborn says:

    Another startup attacking the developer vertical for profiles is http://www.geeklist.com I consider them an “achievement” oriented social network for geeks. Some very smart features for profiles, connections, jobs – both posting and availability, plus sharing of links to relevant resources and the usual up voting and promoting features. My invite code if anyone is interested: https://geekli.st/Silverborne/invite/CF5E018E46 Basically, a cool place where developers can hang out and share their accomplishments.

  41. Silverborn says:

    This is actually brilliant. One of the problems with platforms like Etsy is discovery. They have become so large that everyone in a similar vertical gets lost. But if you start with something very natural – like geography – you are already solving part of the discovery problem. Curation by Location. I love it.

  42. Tim, whenever I see the Airbnb example I think the same thing, but then I have to look at the number of nights stayed.

    I have asked at least 50 people and everyone looks at me like I’m an idiot. Rent your room to a complete stranger? Stay in a complete strangers room? But then I look at the numbers booked.

    The thing I can’t figure out is with that many nights booked how there have been so few problems. Maybe because they have stayed within the high tech community?

    I know from the hospitality industry that 1 in 5,000 stays results in a serious problem. I don’t mean a bit of late night noise, I mean a guest dying. So they should have had 2,000 incidents by now and I would think that would be double because not only do you have the variance of guests, but you have to add the variance of hosts. Plus you have to add in the variance of neighbors. I mean with small kids at home if my neighbor started renting out to strangers on a nightly basis my wife would go absolutely nuts, I don’t know what she would do, but it probably would involve calling the cops, and trying to get the guest arrested.

    What shocked me was when they had the first incident they didn’t have anyone in place to handle it which is why it blew out of control. But it meant they didn’t have problems until then. Anecdotally 5% of the population is crazy so I would think they would have many more problems than they do. And the car sharing ones? I consider myself a good person, but I know when I rent a car if I hit a huge bump or something I think: “its a rental” I can’t imagine what somebody would do to a Prius. I need a HomeDepot or Ikea run? Who needs a truck I’ll load that thing until the tires scrape the wheel wells, the owner will never know.

  43. #ThankYouSirAlex says:

    Chris, you have hit the nail on the head regarding the recruiting problem. I think that stack overflow and behance are great sites for aggregating a specific type of data, but it still has to be repurposed before it is of significant use. BTW, dribbble and coroflot are worthy competitors. I would be curious to see if you have written any other topics on the article, as it is near to my heart. Check out https://angel.co/project-sherpa for our ideas on the solution.

  44. :-) My point is that I would be one of the best people to rent to. What I don’t understand is that if you look at the back of house of hospitality companies two HUGE issues they deal with are problems on the employee side and problems on the guest side. You would be shocked at the size of the security departments. At least you can control the employees. Here you have a huge variance. For all I know that host is filming me and going to post on Tumblr. People do stuff in hotel rooms that they never would do at home. Lets just leave it at that.

  45. timrpeterson says:

    i’m being serious,

    wander around the city in which you live and ask 10 strangers if they have heard of Airbnb, I guarantee you 0/10 will

  46. It’s similar in enterprise. Start by creating a point solution to solve a specific problem. Then, over time, add features and APIs to create an end-to-end solution. You can do it all at once, similar to what Workday did, but that takes a lot of time, cash, and people.

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