The Power of Market Places

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Brokers serve two key roles within ecosystems. First, they introduce buyers and sellers. Second, they lend their expertise to help buyers and sellers make the right decisions in the market.

The internet neutralizes the first value proposition of brokers by leveling the information asymmetry between buyers and sellers at a far greater scale with much better data than any broker ever could. And for products and services with relatively small price points, commodity goods or where the cost of failure is low, market places often nullify the value (and cost) of an advisor.

Market places are arguably the best examples of this kind of disruption. Whether in ad tech (Google AdX), real estate (LoopNet, RedFin), accommodation (HomeAway, AirBnB), goods (eBay, etsy), classifieds (Craigslist), taxis (Uber, Hailo), travel (the GDS systems), financial services (AxialMarket, Angelist) market places are black holes within ecosystems.

Market places exert such gravity that once at scale, they are almost impossible to disrupt. Craigslist is the canonical example but all of the companies listed have constructed almost unassailable moats.

In real estate and financial services, where the value of the assets is measured in the millions or more and each asset is relatively unique, advice is valuable and customers will pay for it. So market places serving such verticals provide tools for brokers to succeed. Often, these tools provide both lead generation (customers) and management systems (CRM or deal tracking).

But as data volumes continue to grow exponentially, I believe that the business of brokers of almost every kind will be disrupted. And technology will become the ultimate market maker.

Jan 1, 2013

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