This week, Facebook announced Facebook Marketplace - a new service for selling, ahhh, pretty much anything. Eager users posted ads for everything from furniture to marijuana (see this NY Times article). Trying to get on the site today proved impossible, with a "we'll be back soon" message coming upon my phone. No doubt they'll get that cleaned up quickly, but Adrien Nussenbaum, CEO of Mirakl, weighed in with his thoughts on it.
"Kudos to Facebook for seeking out more ways to connect its 1.71 billion users and make it possible for them to buy and sell from each other. The fact that Facebook recognizes the power of the marketplace model is an excellent sign of progress.
However, Facebook does not seem to know exactly what they are getting themselves into. Marketplaces require extensive product assortment (and availability) and governance to ensure quality of transactions. Without such centralized governance, marketplaces delve into anarchy and drive customers away quickly.
One thing Facebook will do extremely well is connect a huge number of potential buyers with potential sellers. A large audience is key to being able to operate a successful marketplace. The first tenant of a successful marketplace is the ability to drive a large amount of quality site traffic. The marketplace must have enough visitors to make sellers visible to those consumers. The operator is responsible for generating this traffic through effective marketing and this is where Facebook is well-positioned: Facebook can truly deliver in sheer number of users.
However, there are two main areas where the Facebook Marketplace falls short:
1. Extensive product mix + availability. A marketplace must present the right product mix to its buyers and the marketplace operator is responsible for the mix of products offered on the site. Facebook does not seem to have a strategy on how to manage product mix. At present, Facebook maintains absolutely zero control of what is offered on its marketplace, which could work given the peer-to-peer model of the Marketplace. However, without curating the product offerings and defining the monetization strategy, this may fail. Products may simply remain for sale forever, frustrating buyers who can’t find what they want, and sellers who can’t sell their items.
2. Robust governance. Perhaps most importantly, a marketplace must provide an effective legal and governance framework. The operator must ensure that marketplace transactions comply with any relevant regulations. At present, Facebook plans to offer no governance on its marketplace, choosing to simply be a service that introduces someone with something to sell to a potential buyer. When something goes wrong – as it is bound to – neither the buyer nor the seller have the intermediary, Facebook, to help settle the dispute. Over time, this could negatively impact Facebook’s brand.
At Mirakl, we have launched and operated hundreds of marketplaces and know exactly what Facebook is getting into. As it stands, Facebook’s major misses on assortment and governance strategy will lead to Facebook’s Marketplace demise.
To succeed, Facebook must put greater thought into how it curates its product mix and how it governs its marketplace. In addition, Facebook must be ready for potential organizational changes that could be required, such as merchandising teams and seller quality control managers.
Facebook clearly believes in the marketplace model of connecting buyers and sellers and using the internet to break down traditional global barriers. But, a successful marketplace operation requires experience, pre-built workflow and rules, and a robust, purpose-built technology platform in order to ensure success."