The Two Sided Marketplace
Merchants have products but limited eyeballs. Channels have eyeballs but no products. We’re here to break down the walls between the two.
Any two-sided marketplace consists of bifurcated parties with symmetrical interests in the classic supply and demand scenario. This means that one side of the market can provide their products in exchange for something - this is the supply. The other side of the market can leverage the supply at a premium to someone who wants to purchase that product - this is the demand. In VIOLET’s case, we serve two specific groups of people: merchants and channels. For us, those words have very specific meaning. Let’s start by defining these terms in our world.
We define a merchant as any company or person that sells a product online. The companies have inventory, whether it’s in their own warehouse or someone else’s. They may or may not have a physical store. They might be a Fortune 500 company, or a 2 person company that designs really cool watches and sells direct to consumer. Additionally, these companies may or may not manufacture the product that they’re selling. For this specific reason, we define this party as a Merchant and not a retailer. Retailers traditionally are aggregators and sellers of someone else’s products. Those lines are now blurred, with manufacturers selling direct to consumer on and offline. Inversely, many traditional retailers have rolled out their private labels or acquired brands altogether. Not to mention the rise of micro-brands: companies that sell one or very few targeted products direct to consumer.
We define any company or person that creates an app that exists on the internet. These apps cover the full range of possibilities in terms of technology and size. This could be a social media company like Facebook, Instagram, or SnapChat. It could be a video company like YouTube, Vimeo, or others. It could be a voice application. It could be a messaging application. Or, it could be an app in augmented reality that hasn’t been created yet. It could be a VR experience that’s fully immersive. Any one of these platforms and channels would fit the bill. It could also be an indie developer building a project on nights and weekends, Or, it could be a massive team at one of the industry’s largest companies.
Here’s the deal. Channels (according to the above definitions), create the apps where people are spending almost all of their time on the internet. These are the eyeball companies. These companies constitute the vast majority of the real estate on the web. You can do a lot of things on these apps, but you can’t buy products. If in some of them you can buy apps, you can really only buy products they sell, or who constitute one of the direct, one-off integrations they’ve built. It’s limiting in the sense that there is no supply. Or, at least there’s no direct supply.
The 0.00000005% Problem
Merchants have products they want to sell. These products exist on their website, which is one of 1.7 billion sites on the internet. That’s a pretty bad ratio. We call this the 0.00000005% problem. It really rolls off the tongue. At the end of the day, Merchant’s need eyeballs. With so many websites, and a majority of people spending their time on a small subset of those 1.7 billion, Merchant’s pay money to channels in hopes that they can lure someone away from that experience to their website. Once on their website, then the shopper can make an actual purchase. This is all the merchant wants.
Channels have eyeballs and experiences. Increasingly, people are starting to spend time finding the products they want to buy on the internet, a lot of which happens on Amazon and other marketplaces or aggregators. These have their pros and cons, and we’re fans of all of them, as they continue to push and force our industry to evolve, grow and get better. One thing we know is, the ecosystem of the broader internet is always better at serving the multitude of interests that exist for every type of user. We believe that every Channel (regardless of size) should be able to sell a product in their app if they want to. We’re really excited about the apps that no one has even thought of, yet. What does it look like to go to a mall in Virtual Reality? What will it be like to browse a catalog in voice? What new types of marketplaces will exist? How can we empower more brands and curators to provide specific products to their best customers. Ultimately, this is about greater choice, increasing access, a bias for efficiency in the broader internet.
This is the definition of a two-sided marketplace. Merchants have products but limited eyeballs. Channels have eyeballs but no products. We’re here to break down the walls between the two. Let’s open up the possibilities for commerce on any device, in place, at any time.