Market Networks: A Four Year Perspective

Market Networks as a term today still has no clear definition or even a wiki page, yet it’s pretty easy to understand.

Market Networks as a concept made a relatively big splash among VCs back in 2015 as evidenced by publications in TechCrunch and NFX (a venture fund):

• TechCrunch: From Social Networks To Market Networks
• NFX: The Next 10 Years Will Be About “Market Networks”

It’s been four years, however, where’s the hype?

In this article I am going to do a bit of explanation of what a market network is and offer a perspective. (Spoiler: if you follow me, you know it’s about blockchain).

What is a market network?

To make it really short, a market network is a blend of a marketplace and a social network with a SaaS solution to help the service providers — who are individuals in the market network as opposed to companies — work with customers and other service providers on longer-lasting and more complex projects instead of just quick transactions like on Uber or eBay. Although, as one user on Hacker News remarked, “the SaaS part seems just thrown in there, like ketchup on French food.”

Marketplaces are primarily about transactions, even though there are definitely reviews and the overall score that potential customers base their purchasing decisions on. Most people check the driver score when ordering a ride on Uber, same with eBay and purchasing products, and so on. These, however, are marketplaces since buyers and sellers meet there for a one-off transaction. Marketplaces are aggregators of sellers.

Social networks are — well, they are social networks. People communicate and build relationships on LinkedIn, Facebook and so on. Commerce is not the core objective of social networks.

So, now you have two separate places for your online presence and commerce: a marketplace to sell stuff, and a social network to build relationships.

What, however, if you provide a service that is more complex than a mere buy-sell transaction. And on top of that, what if you need collaboration with other professionals in your industry to form a team to provide an end-to-end service?

Well, that’s where market networks come in. In the market network, you are a service provider, but also a person with a profile, with history, reviews, score, etc. You can team up with other people to provide a complex service to a customer and channel the workflow through a SaaS solution.

Four years ago HoneyBook was lauded as the prime example of this new class of market network startups, and VCs competed to invest in it.

HoneyBook was a market network for the events planner industry. A typical HoneyBook scenario would be:

1. You sign up as an event planner — an individual willing to provide the service.
2. You build your profile with HoneyBook, and it’s your home on the Web.
3. You use the built-in SaaS solution to work with your customers, send proposals, digitally sign contracts and so on.
4. You also team up with other professionals in the HoneyBook network, those that have profiles and reputation, to provide end-to-end service for an event. An example would be you doing all the planning for a customer’s wedding, working with a person who does photography, and signing up a florist for the event. When the event is done, everyone gets paid.

Makes sense, right? The world is ultimately moving towards the highest granularity level in how people work with each other — the level of an individual — including the provision of services. Market networks seem to be in tune with this, and back in 2015 it was proclaimed that the next decade was going to be about market networks, just like the previous one was about social media.

It’s been four years, however, and the hype is just not there. Honeybook seems to have pivoted to a project management SaaS solution. What happened?

I don’t have any insider knowledge, but I do have a perspective that I’d like to share.

A quick stroll down the web evolution lane

You might have heard the word Web 1.0, Web 2.0, and Web 3.0 ad nauseam, but I am going to use these terms since they are easiest to set the right context.

Web 1.0

The very loose period for Web 1.0 is the 90s to early 2000s. This was when suddenly anyone was able to turn their connected computer into a web server and become an active part of the Internet. The ease of feeding your information to the anyone online was a great business and entrepreneurship opportunity, and it peaked roughly at the turn of the century.

Web 2.0

Mid-2000s to roughly present days. While Web 1.0 was more of an online bulletin board where you could publish anything but in one direction and have no real feedback, Web 2.0 was more about collaboration and cooperation.

The term that marked Web 2.0 was platform. The Internet was now all about platforms where you could communicate with other people online, exchange information, and create things together. Platformization became the new king. And it was great too. Instead of having a constellation of very different and wacky websites that you could check for information — as you would a billboard — you were able now to become an active part of a platform. Not only that, but you were able to earn too — for example, by renting out your room on Airbnb and building customer rapport through a review system.

The thing with Web 2.0 is that it’s all about platforms — from Reddit to Uber. And platforms are containerized versions of the network economy. They are isolated networks that can’t communicate with each other. And on top of that, they really don’t want to, because they always belong to someone. And that someone is never the community that brings value to the platform.

Web 3.0

There’s a lot of opinions on what Web 3.0 is or should be, with the key point being that its defining characteristic is true collaboration.

True collaboration, however, is a pretty vague phrase.

To make Web 3.0 more specific and in context with the two previous stages of the World Wide Web development, I’d propose the following two defining characteristics that are not vague:

• The isolated economy networks currently represented by and embodied in platforms cannot be isolated.
• The platforms must belong to the members that bring value to them and so they must be a network.

That platforms cannot be isolated is illustrated by the history repeating itself — there was no World Wide Web in the 80s, it was all isolated networks. Just like you weren’t able to browse the Internet at the time and willy-nilly hop from one web server to a different one when viewing a document online, you can’t use, for example, your Reddit karma to run a shop on Amazon today.

Which brings to the second point: platforms cannot be platforms. Currently, the level of granularity on the Internet is per platform, not per person. You can have an account on Kickstarter, but you can’t use it on GitHub. These are two completely isolated networks. The level of granularity must go one order lower — to the person. People — or more like our digital representations — a) must be able to operate independently from platforms, and b) the network they operate in and bring value to must belong to them.

Where does that put market networks?

See, I think that market networks, while in a way in tune with where the world is moving in terms of granularization to an individual, are stuck in the Web 2.0 mindset, while we are transitioning to Web 3.0.

Ultimately, market network platforms are platforms and are seen as platforms. They are isolated and containerized. They further fragment the web. To be successful in operating a business in this vast digital space that only keeps growing in user numbers, you must maintain your profile in many networks — social or market — and you can’t effortlessly scale your reputation from one network to a different one.

What if your digital selfhood on the Web always belonged to you — not to a service — and the reputation of your digital selfhood was maintained by the network. The network that also belongs to you? That would be the decentralized reputation that you’d be able to plug into any other centralized network, including market networks.

It’s not that easy for a centralized market network to differentiate among service providing platforms and it takes a lot of effort to build a platform profile that you can use only in an isolated network. When your reputation is decentralized, the entirety of the digital space becomes your market network.

Blockchain is the ultimate infrastructure tool that gives individuals true ownership of their digital selfhood and reputation. And that’s the biggest differentiator that matters in the transition to Web 3.0.

Decentralized, pluggable, or portable — call it what you will — is the key component, not a SaaS solution in an isolated network.

Oh, this is what we are doing with U°Community.