Why Expert Two-Sided Marketplace Startups Rarely Succeed
By: Joe Procopio
Tags: Entrepreneurship, Leadership, Productivity, Business, Startup

Why Expert Two-Sided Marketplace Startups Rarely Succeed

This is what happens when your “experts” aren’t actually experts

When entrepreneurs ask me to review their plans for a two-sided marketplace, there are usually two glaring problems that stand out right away. One: Their marketplace probably doesn’t need to exist. Two: Their supply of providers sucks.

The latter becomes a much bigger problem when the a marketplace aims to match customers with experts.

Expert Two-Sided Marketplaces, or E2SMs, offer customers more than just a quick ride across town (Uber) or handpicked fresh groceries (Instacart). These are services that require a higher level of skill, sometimes a license, certification, or even an advanced degree.

The idea of an E2SM is great. Magic. A good E2SM demystifies a complicated service offering, then acts as a digital concierge to match the customer with exactly the right expert they need, on demand, and at a fair price.

The execution of an E2SM, however, is often lacking. The matching is usually poor, the transaction isn’t easy or timely and, worst of all, the expert isn’t really an expert.

The plague of bogus marketplace experts

I’m intimately familiar with the “expert” problem. I’ve built a number of successful E2SMs, matching customers with investors, coders, writers, marketers, mechanics, and more. I’m building two E2SMs right now, and I’m advising two more.

Recently, I started advising a stealth startup building a highly-skilled expert marketplace in an industry full of bogus expert marketplaces. Now, when I call an expert “bogus,” I don’t mean that they can’t talk shop, what I mean is they have no business parlaying their level of expertise into a marketplace model.

Why marketplace experts often aren’t experts

Building a supply of experts that are truly experts is a lot easier said than done. This is because the vast majority of expert marketplaces settle for a supply pool full of providers that are “just good.”

Just good will kill a marketplace. Quickly and painfully.

So why does an E2SM settle for just good? It’s often due to the mechanics of marketplace supply and demand. In order for a two-sided marketplace to work, customer demand must be high. For the marketplace to be able to meet that demand in a timely manner, provider supply must always be higher than the demand.

This is a juggling act. So in almost all cases, the marketplace will overload provider supply to be able to meet peak customer demand.

To quickly fill provider supply, way too many E2SMs leave it to the provider to self-identify their level of expertise. But every single provider willing to sign on to an E2SM will, without hesitation, label themselves an expert. The overwhelming majority of these providers are just good, and some are awful.

So how do you keep these non-expert providers out of your expert marketplace?

The expert must be properly vetted

When I’m working on an E2SM, the first thing I do is set the bar high for any provider I would apply the “expert” label to. Based on 20+ years of experience building E2SMs, here are the warning signs I look for when vetting an expert:

The expert is a paper expert. A license, certification, even an advanced degree — these are not identifiers of experts. These are identifiers that the provider has met the bare minimum qualifications to work in an official capacity in a field that requires them.

Usually, in the fields where this kind of paper is involved, the only vetting an E2SM does is check for the existence of that paper.

The expert has more accolades than experience. An expert may have name recognition, but being a known quantity doesn’t always equate to being an expert.

E2SMs love providers with names people recognize, because those names bring in customers. There is nothing particularly wrong with this, as being known is usually a good sign that the provider has experience. But every once in a while, you’ll find a provider who spends more time on their brand than on their portfolio.

The expert is a theoretical expert. Some experts spend their entire careers in the lab, not in the field. In my universe, this is the equivalent of a startup advisor advising startups without actually working on a startup. My best startup advice usually goes something like: “I just did this. It worked. You should try it.”

If the expert is five or so years removed from the field, chances are that the field has evolved dramatically in the interim. They’re still probably an expert, just not an E2SM provider.

The expert isn’t multi-faceted. I get wary when I see an expert with a long tenure at a single company or organization. I get more wary when they’ve progressed up the ladder in a single discipline.

Again, they may be the world’s leading expert in a very niche thing, but that doesn’t translate to the provider supply problem in a marketplace.

The expert isn’t vetted on engagement. One of the reasons an E2SM can offer flexibility, efficiency, even cost savings, is because they remove a lot of the dead weight in the process. That said, some experts really rely on that dead weight.

Sure, the marketplace is expected to pick up some of that slack: the scheduling, the communication, the transaction, the marketing — but the provider has to be able to operate independently without a few of the crutches they may be used to.

The expert is a bullshit artist. I can’t tell you how many times I see news or a profile or a wave of social media mentions about an expert in a field I follow, and then I learn later, usually in person, that they have no idea what they’re talking about.

This is the kind of expert that is going to join your E2SM, put your E2SM on their LinkedIn, and never take a single job. Your E2SM is just another link in a chain with a speaking engagement at the end.

Once the expert gets the gig, can they do the gig?

All of that vetting will answer one question: Is the expert actually an expert? There’s a second question that the vetting has to answer, and this is the most overlooked part: Can the expert provide expert service?

The marketplace model tends to swing toward a younger demographic, both on the customer side and the provider side. Younger providers are more tuned to the model because there’s less they have to unlearn.

Here are some additional provider issues every E2SM should vet for:

The expert doesn’t understand the marketplace model. The first part of the vetting will confirm that the provider is a fit for the model. But is the model a fit for the provider? The expert should understand that a marketplace model requires a broader application of their skills, with less support, and the constant establishment of trust with the customer.

The expert isn’t motivated to help the customer. There are a lot of reasons why a provider will treat E2SM customers differently than they would treat their own customers. It might be they see the E2SM as a backfill, or a side gig, or even just another marketing channel. You need to vet their motivation almost as thoroughly as their skills and experience.

The expert won’t adhere to guidelines. For an E2SM to maintain consistency as one of its value propositions, there must be guidelines— like expected level of engagement, things to discuss and not discuss, and what kind of communication is expected and when.

The trouble with experts is that they’ve gotten to where they are by doing things their own way. You’ve got to make sure they can break this habit and follow some rules — light, but required, rules.

Marketplace experts have a dual role. They not only have to satisfy the customer, they also have to add value to the marketplace itself, because an E2SM is only as good as its worst provider.

In my next and final post on E2SM failure points, I’ll talk in depth about the value an E2SM needs to provide to both sides of the marketplace.

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