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Yo, it's CJ! Welcome back to my newsletter for current and aspiring CFOs. My goal is to make YOU better at your job by covering

All in a way you can actually understand.

I also help with two things that keep CFOs up at night: picking the right software and hiring the right people.

Guess who’s back, back again? The business documentary boys.

The marketplace business model is near and dear to my heart. I’ve both failed and succeeded as a middleman. Network effects are a biatch.

That’s why I went all the way back to the Persian Bazaar’s of 3000 BC to figure out how AirBnB can charge such egregious cleaning fees.

If you’ve ever wondered why you can’t cut out the middleman (no matter how hard you try), this is your deep dive (and I mean deep. you may not be able to find me. I’m lost in the sauce).

And for those who want the written version, I’ve included it in full below. It’s about 1,000 words longer than my college thesis on the Vietnam War. Enjoy.

Marketplaces have been around since the grain traders first met on the Mesopotamian plains. Seriously… historians trace the earliest structured markets back to 3000 BCE in the cities of Ur and Uruk (located in modern-day Iraq). This was the birth of the "Designated Area," the radical idea that trade shouldn't just happen anywhere, but at a specific coordinate. Like yo "let's all meet at a specific place at a specific time to do this commerce stuff."

The concept evolved into the Persian Bazaar, a linear strip of stalls covered for protection from the sun. I'm a big strip mall guy myself; there was an Olympia Sporting goods I used to always hit at the Yarmouth Cape Cod Patriot Plaza growing up, and honestly, the DNA is exactly the same. 

Producer Ben: Strip malls are as American as hot dogs and fireworks on the 4th

The Greeks eventually added the Agora, which introduced Categorization, grouping stalls by product type so you didn't have to wander past fish to find clothes. By 100 AD, the path was paved for the Hollister and Abercrombie era with the Trajan Markets in Rome, the earliest example of a permanent, multi-level retail shopfront. Yes, two stories. can you believe that? 

Producer Ben: If only an Ancient Roman could have tasted a Cinnabon… maybe Rome would have never fallen?

Let's fast forward to the big digital shift of the 1990s. Amazon was the first real online marketplace.

Well, kind of.

Technically, if we're being pedantic, the path was cleared by a few outliers you've probably forgotten. Because they’re not here anymore. In 1982, the Boston Computer Exchange launched as a dial-up bulletin board for used computers. 

Producer Ben: Dial-up bulletin boards: imagine shattering your ear drums with that connection sound.

In 1992, Book Stacks Unlimited was selling books via dial-up before moving to the web as Books.com. Then, on August 11, 1994, a site called NetMarket conducted what is widely considered the first secure retail transaction on the World Wide Web when a student bought a copy of Sting's Ten Summoner's Tales for $12.48. Even Pizza Hut beat Amazon to the punch, launching "PizzaNet" in 1994 so people in Santa Cruz could order a large pepperoni pizza online.

But Amazon was the one that permanently moved the needle. It succeeded not by being the first, but by being the most convenient and customer-centric. In its early days, Amazon operated as a "Digital Middleman" with almost zero inventory. When a customer ordered a book, Jeff Bezos and his team would order it from a wholesaler like Ingram Content Group, pack the box on their hands and knees on a concrete floor, and drive it to the USPS themselves. They didn't have a "take rate" yet because they were a first-party retailer, buying at wholesale and selling at a slim margin. It wasn't until 1999 that they launched the Third-Party Marketplace, setting the 15% referral fee that still dominates the industry.

Producer Ben: crazy their take rate hasn’t changed much. How long did it take them to turn a profit?

That’s something we’ll cover in a bit.

While Amazon was perfecting the "Everything Store," Craigslist was becoming the "cockroach" of the internet. Launched in 1995, it gutted newspaper revenue by making classified ads free. Craigslist was the "Discovery Layer"… it didn't handle payments or shipping; it simply introduced you to a stranger. It forced the world to perfect the "meet in a Starbucks parking lot with a $20 bill" transaction.

If Craigslist was about discovery, eBay was the "Trust Architect." Founded as AuctionWeb in 1995, eBay tackled the "Stranger Danger" of the early web by inventing Reputation as Currency. Their Feedback Forum turned trust into a data point, proving that people would trade globally if their reputation was on the line. 

Producer Ben: and they went a step further by acquiring PayPal

Yes. By acquiring PayPal in 2002, they removed the friction of mailing paper checks and made digital commerce feel like a professional exchange rather than a gamble.

However, being a "Generalist" eventually became a weakness for eBay and Craigslist. Because they tried to be everything to everyone, they couldn't be the best at any one thing. This led to the "Unbundling of Craigslist," a concept famously mapped out by investor Andrew Parker on his blog “the Gong show”.

Producer Ben: This is a great visual. Do you think we’ll look back in 10 or so years at a different map but for the unbundling of AI/ChatGPT?

There’s a through line. Entrepreneurs realized that if they took just one category, like Housing or Jobs, and made it safer and more specialized, they could build a multi-billion dollar empire.

This gave rise to the Vertical Marketplaces. At the time, many skeptics thought these opportunities were too small, falling into the "Small Market Fallacy." They asked, "Just shoes?" or "Who would buy a used sneaker online?" But players like Zappos and StockX proved them wrong. By adding layers like 365-day returns or professional authentication, they didn't just capture a niche; they expanded it. They proved that a marketplace doesn't have to be everything to everyone—it just has to be the absolute best at one thing.

Producer Ben: CJ do you wanna show the folks at home your purchase history on StockX or Goat? How much heat are you collecting every month?

Yes and that’s why you should click our ad sponsors. I owe people money 

Anywho - So what does "best at one thing" actually look like when it scales?

StockX took the sneaker resale market and made it feel like placing a limit order. Blind bidding, ask prices, a verification center that authenticated every pair before it shipped. They turned a gray market into a transparent one, and the transparency itself grew the market. People who never would have bought a $400 shoe from a stranger on eBay were suddenly comfortable because the process felt professional, not like rolling the dice.

Hipcamp did the same thing to camping. The problem wasn't that people didn't want to camp—it's that getting a national park reservation had become the Hunger Games. You're refreshing Recreation.gov at 7 AM six months in advance hoping to snag a site at Yosemite like it's Ticketmaster. Not really a great experience.

Producer Ben: Let the record state: the only thing stopping me from scaling Half Dome is that website. It’s not my fear of heights

Hipcamp's insight was that there's a staggering amount of unused private land (ranches, farms, vineyards) owned by people who'd happily let you pitch a tent for $40 a night. That supply literally didn't exist as a category before. Nobody was cold-calling a rancher in Montana asking to sleep in their meadow. Hipcamp created the supply class and the demand followed.

Reverb did it for musical instruments. If you've ever tried to buy a vintage guitar on eBay, you know the problem. A $3,000 Les Paul described as "good condition" with two blurry photos and a "no returns" policy. Hard to send someone money confidently. 

Reverb added real condition grading, historical price guides, and a community of people who actually understood the difference between a '59 reissue and a '72 original. They treated instruments the way StockX treated sneakers: like assets that deserve a proper transaction layer. Etsy eventually acquired them, which tells you a lot about the niche they successfully professionalized.

Ok one more. Faire is a sneaky one. The old model for independent retail buying was brutal: fly to a trade show, walk a convention floor for three days, place orders based on gut feel, and pray the inventory sells. Faire digitized the whole thing, which alone would have been useful but not transformative. The real wedge was the financial layer: net-60 terms and free returns meant a boutique owner could take a chance on a new candle brand with basically zero downside. They de-risked discovery for the buyer and unlocked distribution for the seller. 

Producer Ben: It seems the pattern is always the same. Pick one category that a generalist is serving poorly. Add a trust layer, a curation layer, or a financial layer that the generalist can't justify building.. Rinse and repeat. Do you think we’re just in a perpetual cycle of bundling and unbundling?

Right. The vertical playbook works. And what really made it work was when everyone got a supercomputer in their pocket. Many of the more recent marketplaces I mentioned wouldn’t be possible or as attractive if they were only on desktop. 

The iPhone launched in 2007. The App Store opened in 2008. And within a few years, three things that used to be impossible became trivial: you knew exactly where someone was, they could send you a photo instantly, and they were reachable at all times. GPS, camera, push notifications. Boom goes the dynamite.

Producer Ben: And yet no one has topped the app “iBeer”

Mobile collapsed the time between intent and transaction from hours to seconds.

Uber is the purest example. The entire product is: you need a car, there's one four minutes away, here's a map showing it moving toward you in real time. None of that works on a desktop. Same for DoorDash, same for Instacart. An entire generation of marketplaces didn't just benefit from mobile. They couldn't have existed without it.

And mobile did something subtler too… it lowered the barrier to becoming a seller. Listing a product on eBay in 2004 meant uploading photos from a digital camera, writing a description, setting auction parameters. It was a part-time job. Poshmark and Mercari turned that into: take a photo, set a price, post. Done. You could list a jacket on your couch during a commercial break. When you make selling that frictionless, you unlock a supply class of people who never would have bothered before — and suddenly you have a much bigger marketplace.

But here's the thing about having a supercomputer in your pocket: it only has one home screen. And most people only use four or five apps to do most of their buying.

Producer Ben: And yet STILL only one app where you can virtually drink beer

I spoke with Boris Wertz, Partner at Version One Ventures and a former marketplace founder, about what actually wins in marketplaces over the long run. His answer surprised me. It's not supply.

In the beginning, every marketplace is built around supply. If you don't have supply, you don't have a marketplace. But over time, supply becomes liquid. Sellers look for other places to sell. Competitors onboard the same inventory. Supply, while necessary to differentiate at the start, is an eroding moat.

What wins is mindshare. The buyer's habit. The muscle memory of which app you open first.

You can find 99.999999% of the things on Amazon somewhere else. Their long tail of books got them off the ground. But they didn't win because of supply. They win because you're already on Amazon for twelve other things, so why would you go anywhere else?

Uber and Lyft are the clearest example. They started in the same category. The supply is literally identical — most drivers are working on both.

Over time, you aren't competing against other companies in your category. You're competing against all apps for mindshare. Someone once said to me, "You aren't competing against other CFO newsletters. You're competing against Taylor Swift." It was partly in jest, but it's true. All consumption competes for limited hours in the day. The average person has four or five apps that handle most of their commerce. If you're not one of them, you only get the leftovers.

Producer Ben: I know you’ve been working hard on your album of covers, CJ, but for now I think it’s best you stick to interviews.

In Asian markets, this has already played out to its logical conclusion. Apps like Grab — the "Everyday Everything App" — handle deliveries, rides, and financial services all in one place. The endgame for any marketplace is to become so embedded in your routine that switching feels like effort. Mindshare isn't just a marketing concept. It's the ultimate strategic high ground.

Producer Ben: Folks, I think you better break out your abacuses and slide rulers cuz CJ is about to drop some math on ya

Yes. It leads me to take rates. The main character in this story.

Producer Ben: the vig, the rake, the juice, the slippery steve

I think you made up that last one, but yes. 

People talk about take rates as if they're pulled out of a hat. They're not.

There are three characteristics I've identified that impact what you can (or rather, should) charge. I make the distinction between can and should because there are absolutely examples of marketplaces who got greedy and ran themselves into the ground (see: Groupon). 

Take rate = f(x) of: Purchase frequency × ticket size × platform labor intensity

Producer Ben: Alright, Will Hunting, break that down for me.

Purchase frequency is the inverse relationship most people miss. The more often someone transacts on your platform, the less you can charge per transaction in absolute terms 

Producer Ben: I feel like there’s a nuance though between big rate on small transaction size and small rate on massive purchase

What are you a quant or something

Ticket size works the same way in reverse. The larger the transaction, the lower the take rate needs to be. Nobody is paying a 20% fee on a $500,000 home sale — that's why real estate brokerages hover around 5-6%. But a $25 DoorDash order? You'll barely notice the 30% markup buried in the delivery fee and service charge.

Producer Ben: We’re dangerously close to uncovering my doordash addiction. I definitely don’t notice.

Platform labor intensity is the big one, and it's the one that actually justifies higher rates. The more work you do, the more juice you get. Dan Hockenmaier who runs strategy and analytics at Faire framed this nicely as a spectrum:

In the 10% range, you have the lightest touch. Amazon and eBay are essentially aggregating demand and generating leads. Thumbtack is even more honest about it — they charge the plumber a flat fee for the lead, somewhere between $10 and $100, and then bounce. They know full well that the plumber is handing out a business card on the way out the door, and they built the business model to account for that disintermediation.

In the 10-20% range, you've added trust on top of discovery. Etsy gives the maker an identity and the buyer a safe checkout. StockX physically verifies your sneakers before shipping them. You're not just introducing two strangers anymore — you're vouching for the transaction.

In the 20-30% range, you've built the entire logistics layer. DoorDash, Uber, Lyft — these companies employ (or contract) a fleet of humans who physically move products or people from point A to point B. That's not a software margin business. That's operational intensity, and the take rate reflects it. Vacasa sits here too — they're not just listing your beach house, they're unclogging your toilet at 2 AM when a guest calls.

Producer Ben: Looks like an opportunity for someone to unbundle the plumbing side of the vacation rental business.

One thing that surprised me in the research: the supply side always pays. Every single marketplace I looked at charges the seller. Which makes intuitive sense; the platform is bringing them business. The spicier debate is whether that business is net new or just offline demand that got rerouted through a middleman who now takes a cut.

More than half — 14 out of 25 marketplaces I studied — charge both sides. And for some of them, the demand-side fee more than doubles the effective rake. Only three charged the demand side more than the supply side: Airbnb, StubHub, and SeatGeek. And only one charged demand at least 3x more than supply. Airbnb. Which brings us to a question worth asking.

Ben: So when does a marketplace cross the line?

Bill Gurley wrote the definitive piece on this in 2013, called "A Rake Too Far." The core argument is counterintuitive: a higher rake is not always better. In fact, pricing too high might be the most dangerous strategic mistake a marketplace can make.

The logic is simple once you see it. Your take rate becomes part of the landed price for the consumer. If you're charging 30% and your competitor is charging 10%, the exact same product costs more on your platform. You've turned your own pricing into a reason for buyers to leave. And on the supply side, sellers aren't stupid — they'll migrate to wherever the economics are better. High rakes don't just create friction. They create an incentive for someone to come undercut you.

Gurley's favorite example was Booking.com. In the late '90s, Expedia and Travelocity were running what's called the "merchant model" — bundling vacation packages at rakes north of 30%. Booking.com came in with a 10% agency model that gave hotels better economics and better cash flow terms. 

Producer Ben: what was the result?

They signed up nearly every small hotel in Europe. More supply meant more selection for travelers, which meant more demand, which meant more hotels wanted in. The flywheel spun because the rake was low enough to let it.

Here's the sexy part. Once Booking.com had dominant supply, they let hotels voluntarily bid up their rake for better placement. So the average rake climbed over time, but it was market-driven, not imposed. Hotels that wanted more visibility paid more. Hotels that didn't weren't punished. And when prices went up, the suppliers blamed their competition, not the platform. 

Producer Ben: It's the same genius behind Google AdWords.

Exactly 

Producer Ben: are there any cautionary tales you can share?

Of course. Groupon was charging merchants roughly 38%, but that was after the merchant had already underwritten a 50% discount to the consumer. Do the math and the merchant was recovering about 30 cents on every dollar of value they delivered. The "effective" rake was closer to 70%. That's less a partnership and more a hostage situation. And merchants figured that out pretty quickly.

Gurley also pointed at Apple and Facebook, both charging a flat 30% on their platforms. For Apple, that rake didn't just extract revenue; it repelled partners. Amazon looked at the 30% cut on digital content and decided it was cheaper to build an entire competing hardware ecosystem. 

The Kindle Fire exists, at least in part, because Apple's rake made partnership math impossible. 

And Facebook's 30% cut on games eventually pushed Zynga and others to actively reduce their platform dependency, tracking "percentage of revenue tied to Facebook" as a metric to drive down, not up.

Famous investor Peter Drucker called it one of the five deadly business sins: worship of high profit margins and premium pricing. As Gurley put it, there's a big difference between what you can extract and what you should extract. Water runs downhill.

Producer Ben: I feel like Airbnb kinda made this mistake too. I’m starting to stack up my hotel reward points again

Let's talk about Airbnb. Because for a while there, they were speedrunning every mistake Gurley warned about.

You'd find a listing for $150 a night. Great. Click through, pick your dates, hit reserve, and suddenly you're staring at $287. Where did the other $137 come from? A $75 cleaning fee. A $42 service fee. An $18 "Airbnb processing fee" which, I'm sorry, what is that? 

Producer Ben: It just feels so shady. I wanna pay for what I’m paying for. Why show me these other fees that I’d otherwise assume would be included?What is the processing fee processing that the service fee wasn't servicing?

It became a meme. People were posting side-by-side screenshots of the nightly rate versus the checkout total like it was a gotcha. And honestly, it was. The gap between the advertised price and the real price had gotten so absurd that people started doing the math and realizing they could just book a Marriott for less. Which is the most damning sentence you can write about a disruptor, that the thing you disrupted is now the better deal.

The cleaning fees were the worst offender. Hosts were charging $200 cleaning fees on a two-night stay and then leaving a laminated note on the counter asking you to strip the beds, start the laundry, take out the trash, and load the dishwasher before checkout. So you're paying a cleaning fee to clean the place yourself. 

Producer Ben: Officer, I'd like to report a crime.

And remember — Airbnb was one of only three marketplaces in my research that charged the demand side more than the supply side. They were one of the only platforms where the buyer was paying a bigger cut than the seller. Which is a bold choice when the buyer is also the one writing the review.

To their credit, they've course-corrected. In late 2022, Airbnb started pushing hosts to bake cleaning fees into the nightly rate and rolled out total price display so you could see the real number before you clicked. 

The checkout chore lists got publicly shamed enough that the culture shifted. But for a stretch there, Airbnb was the poster child for what happens when a marketplace lets its fee structure become the product's biggest friction point. The platform that was supposed to make travel cheaper and more personal had somehow become more expensive and more annoying than a Holiday Inn.

Producer Ben: I’m not a doctor but I did stay at a holiday inn express last night

I set myself up for that one.

So marketplaces charge a take rate. But the best ones figured out they don't have to stop there.

I wrote a whole piece on what I call the Marketplace Plus Model, it’s from speaking with Collin Gardner who invests in marketplaces and was chief product officer at outdoorsy, an RV rental marketplace. 

The short version is this: the smartest marketplaces provide something useful — usually software — to one side of the transaction as a hook to enter the network, and then layer on additional revenue streams before, during, or after the core transaction.

OpenTable is the cleanest example. Most people don't know this, but OpenTable started as a single-player tool. Restaurants used it as a digital seating chart — a visual way to manage where parties would sit across time blocks. It replaced pen and paper. 

That's it. No consumer-facing product, no network. Just useful software for the supply side. And that wedge gave them an unfair advantage when they eventually opened the platform up and let consumers book online. By the time they turned on the demand side, they were already the system of record.

The same playbook shows up everywhere. Outdoorsy built a SaaS product that turned a clipboard into a booking system for people renting out their RVs. They targeted the professionalized supply — people who were already renting RVs as a form of employment but running the operation on paper. That cohort cared about utilization rates and maximizing revenue. Give them real tools and they'll bring their best inventory to your platform, which means instant bookability for the consumer, which means a better experience, which means more demand. 

Producer Ben: Ah the unbundling of craigslist has returned!

True. And the "plus" doesn't have to come before the transaction either. It can come after. At PartsTech, where I was CFO, we served as a three-way marketplace between auto parts manufacturers, suppliers, and garages. Once a garage was already ordering parts on our platform, we offered them a SaaS tool to estimate labor hours for completing a job. That one addition tripled ARPU — we were making a percentage on each parts transaction plus a monthly SaaS fee — and it made us dramatically harder to rip out because we were embedded in their daily workflow.

On the demand side, the most obvious example is Amazon Prime. Pay an annual fee, get your stuff faster, and oh by the way here's a streaming library. The "plus" turned a transactional relationship into a subscription relationship. 

Other examples: StockX charges for authentication. Airlines upsell trip insurance at checkout with the most apocalyptic language imaginable — "click here if you don't want to protect your $782 flight to California during wildfire season."

The pattern is always the same: solve adjacent problems for your customers before, during, or after they use your core product. Every layer you add increases revenue per user and makes it harder to leave. The marketplace becomes less of a transaction platform and more of an operating system.

Quick detour. Let's talk about Facebook Marketplace. Because I think it might be one of the most underappreciated businesses on the internet, and also somehow, the most primitive.

Here are the numbers. Facebook Marketplace has over 1.1 billion monthly active users. eBay has 134 million active buyers. That's not a typo — Facebook Marketplace has roughly 8x the active user base of eBay. The total value of goods sold on Marketplace has been estimated at $98 billion. eBay did $74.7 billion in GMV in 2024. Facebook Marketplace is almost certainly the largest peer-to-peer marketplace on the planet by volume, and most people treat it like a feature, not a business.

Producer Ben: so why isn’t the flywheel spinning here?

Estimated revenue? Somewhere around $30 billion. eBay did $10.3 billion in 2024 and trades at a market cap of roughly $40 billion. If you slap a similar multiple on Marketplace's revenue — call it 4x — you're looking at a standalone entity worth $120 billion. That would make it roughly 3x the size of eBay. And it's a tab inside an app that most people open to argue with their aunt about politics

Producer Ben: maybe an aggressive valuation? 

Even at half of that though, it’s gotta be worth more than $50 billion..

Producer Ben: And yet — the experience is essentially Craigslist with your real name attached.

There's no payment processing on most transactions. There's no shipping infrastructure for local deals. There's no authentication, no buyer protection worth mentioning, no condition grading. The transaction flow for the majority of Marketplace sales is: see a listing, message the seller on Messenger, negotiate via text like you're planning a hostage exchange, drive to a parking lot, hand over cash, and hope the item works. Sixteen percent of Facebook's entire user base logs in specifically to do this. Every month.

We spent the last thirty minutes talking about how marketplaces evolve by adding trust layers, verification, logistics, and financial products. Facebook Marketplace skipped all of that. It's a $100 billion GMV platform running on profile pictures and good faith. The scam rate reflects this — over 62% of users report encountering fraudulent activity at some point.

So are we going backward? Is Facebook Marketplace just Craigslist 2.0? Kind of. But that's also what makes it fascinating from a business perspective. Craigslist proved that raw demand for local commerce is enormous. Facebook proved that if you attach real identities to that demand, you get enough trust to transact at massive scale — even without building any of the infrastructure we've been describing. The question isn't whether Facebook Marketplace is sophisticated. It's whether Meta ever decides to actually build on it. Because if they added payments, shipping, authentication — even a fraction of what eBay or StockX has built — the $120 billion number starts to look conservative.

For now, though, it remains the world's most valuable flea market. Meet me behind the Wendy's. I'll bring the IKEA dresser. You bring cash. Tell a friend I’m going in case I don’t come back.

Producer Ben: ok so other than getting kidnapped during a transaction or charging too high of a take rate, what are some other reasons marketplaces may fail? 

Not every marketplace works. And the failures are often more instructive than the successes, because they tend to share a common DNA: the marketplace tried to become something it was never supposed to be.

The single most dangerous thing a marketplace can do is take on inventory. I cannot stress this enough. The moment you buy product and put it on your balance sheet, you are no longer a marketplace. You are a retailer. And retailers have a completely different risk profile, cost structure, and margin expectation than platforms. The whole beauty of a marketplace is that you facilitate the transaction without owning the thing being sold. You take a cut of someone else's risk. The second you start buying inventory, you've swapped a variable cost model for a fixed cost model, and you'd better pray that the market cooperates — because if it doesn't, you're holding a warehouse full of depreciating assets with nobody to sell them to.

Producer Ben: I feel like this ties in directly with our History of EBITDA video we did. Go check that out after this one

Hodinkee is the case study everyone in media and commerce should memorize. They started as a watch content site — arguably the best watch content site ever built. Gorgeous photography, deep editorial, a passionate community of collectors who trusted Ben Clymer's taste. The content was the product. And for a while, they monetized it brilliantly: affiliate commissions, limited edition collaborations with brands like Vacheron that sold out instantly, and eventually a watch insurance product that underwrote nearly a billion dollars in policies. That's a beautiful, capital-light business.

Then they decided to become a retailer.

In 2017, they launched the Hodinkee Shop, stocking new watches at MSRP from over 30 brands. In 2021, they acquired Crown & Caliber, a pre-owned watch dealer, reportedly for around $40 million. This meant Hodinkee was now buying and holding inventory of pre-owned luxury watches — Rolexes, Pateks, APs — right as the secondary watch market was peaking. The WatchCharts Overall Market Index hit 47,604 in March 2022. By January 2023, it was 34,569. A 27% drop. And it kept falling — over 40% from peak to trough.

Hodinkee was suddenly stuck with the double whammy every inventory-holding business dreads: a freeze in sales and plummeting asset values. The watches sitting in the Crown & Caliber vault were worth less every month. The company went from 150 employees in September 2022 to somewhere between 30 and 75 after multiple rounds of layoffs across 2023 and 2024. The founder admitted they hadn't been profitable for three years. The remaining inventory was eventually sold off to a New York-based wholesaler for a "low seven figures" — on an acquisition that reportedly cost $40 million. Watches of Switzerland eventually acquired the media brand, sans inventory, sans retail operation.

The lesson isn't that watches are a bad business. StockX built a thriving watch marketplace without ever buying a single shoe. They authenticate. They facilitate. They take a cut. They never own the inventory. Hodinkee could have done the same thing — run a consignment marketplace powered by the most trusted editorial brand in the category. Instead, they went from taking a percentage of someone else's risk to owning all the risk themselves. That's the difference between a platform and a store. And it cost them everything.

Hodinkee isn't even the most expensive version of this mistake. Fab.com raised $336 million in venture capital, hit a $1 billion valuation, burned through $14 million a month, and eventually sold for somewhere between $15 and $30 million. Total fire sale.

The second way marketplaces fail is more subtle, and it's the disintermediation problem — the fancy word for "the buyer and seller cut you out."

This is the fundamental risk of any service marketplace. Think about what happens when you hire a house cleaner through a platform. The first booking goes through the app. The cleaner shows up, does great work, you're happy. The cleaner hands you a business card on the way out the door. Or you just exchange numbers. Why would either of you go back through the platform for the second booking? The cleaner gets to keep the 25% the platform was taking. You get a lower price. The platform gets nothing.

Homejoy is the textbook example. Founded in 2012, raised $40 million, expanded to over 30 cities. The growth looked incredible on paper. But only 15-20% of customers booked a second cleaning within a month. They'd used Groupon-style promotions to acquire customers at a loss, and then those customers either churned or went directly to the cleaner. The unit economics were upside down — negative LTV on acquisition spend that was already unsustainable. Combine that with contractor classification lawsuits and inconsistent service quality, and Homejoy shut down in 2015.

Producer Ben: I think Handy faced the same problem. 

Right. 

Thumbtack figured this out early and designed around it. Instead of taking a percentage of ongoing transactions — which would create an enormous incentive for both sides to cut them out — they charged the service provider a flat lead generation fee upfront. Somewhere between $10 and $100 per lead, depending on the job. That's it. They knew the plumber was going to hand out a business card. They knew the customer was going to call the plumber directly next time. So they stopped pretending they could prevent it and instead built a business model that captured value on the first transaction and let the rest go. It's a more honest model, and it's why Thumbtack is still alive while Homejoy is a footnote.

Producer Ben: there’s a pattern 

The pattern across all of these failures boils down to a simple diagnostic question: does the platform add value to every transaction, or only the first one?

If you're Uber, you add value every single time — real-time matching, routing, payment, insurance. The supply is interchangeable, the demand is spontaneous, and neither side has an incentive to go around you. If you're a cleaning marketplace, you add value exactly once: when you introduce the customer to the cleaner. After that, you're just a toll booth 

Producer Ben: so what does the future hold?

Now let's look forward.

If someone told you ten years ago that people would routinely spend $25,000 to $40,000 on a used car they'd never sat in, never test-driven, and never seen in person — that it would just show up on a flatbed truck in their driveway — you would have thought that was insane. Cars are one of the most personal, tactile purchases most people make. You're supposed to kick the tires. You're supposed to take it around the block. You're supposed to smell the interior and make sure the previous owner wasn't smoking in it.

And yet Carvana sold 416,348 cars in 2024. Revenue hit $13.7 billion, up 27% year over year. They became, by their own accounting, the most profitable public automotive retailer in American history as measured by EBITDA margin. They're targeting 3 million cars sold over the next five to ten years. The vending machine gimmick was cute, but what actually won was convenience and the elimination of the dealership experience. Turns out people hated the negotiation, the pressure, the four-hour Saturday at a fluorescent-lit showroom more than they needed to sit in the driver's seat.

Producer Ben: So will we buy houses the same way?

It's already starting. Before the pandemic, roughly 3% of homebuyers purchased sight unseen. By 2025, that number is approaching 20%. The tools are getting better: 3D walkthroughs, drone footage, AI-powered valuations, remote notarization, digital escrow. A military family relocating from San Diego to Virginia doesn't have time to fly out for twelve showings. A remote worker moving from Brooklyn to Boise is scrolling Zillow the same way they scroll Amazon.

But I think housing will be the last domino, not the next one. Cars are standardized in a way that houses aren't — a 2022 Honda Civic is a 2022 Honda Civic regardless of which dealership it comes from. A three-bedroom house in Denver is wildly different from the one two blocks away. The inspection matters. The neighborhood matters. And unlike a car, you can't return a house in seven days if the foundation cracks.

The more likely near-term future is that marketplaces chip away at the process without replacing it entirely. We'll search online, narrow down virtually, maybe make offers sight unseen in competitive markets, but still want to physically stand in the kitchen of the house we're about to spend $500,000 on. The marketplace will handle discovery, financing, title, and closing — everything except the gut check. And honestly, that's a lot of value to capture even without owning the final decision.

Producer Ben: Now the question everyone's asking: how will AI change marketplaces?

I think the honest answer is that AI won't reinvent the marketplace model — it'll compress everything that's already happening and make it faster, cheaper, and more personalized.

On the discovery side, AI will replace browsing with matching. Right now, you go to Amazon and search for "running shoes" and get 50,000 results sorted by some opaque combination of ad spend, reviews, and relevance. In the near future, you'll tell an AI agent "I need trail running shoes for wide feet, under $150, and I hate the ones with thick soles" and it'll come back with three options. The browsing catalog becomes a two way convo. That changes the power dynamics — because if the AI is doing the filtering, the marketplace's ability to sell premium placement to sellers gets disrupted. The billboard on the digital highway matters less when everyone has a personal chauffeur taking them directly to the store they need.

On the supply side, AI collapses the cost of being a seller. Listing products, writing descriptions, pricing competitively, managing inventory, handling customer service — all of that gets dramatically cheaper and easier with AI tools. That means more supply enters the market, which is generally good for consumers but creates more competition for existing sellers. The barriers to starting a small business on Etsy or Amazon go from low to nearly zero.

On the matching side — especially for service marketplaces — AI could actually solve the disintermediation problem that killed Homejoy. If an AI agent is continuously matching you with the best available cleaner based on your preferences, schedule, and real-time availability, the value of the platform extends beyond the first introduction. The AI becomes the reason you stay. It's the same reason you keep using Spotify instead of just downloading the twenty albums you already like — the recommendation engine is the product.

Producer Ben: the bad guys use AI too. What about fraud? 

Good question. on the trust side, AI-powered fraud detection, automated verification, and reputation scoring will make marketplaces safer, which expands the addressable market. Every person who doesn't use Facebook Marketplace because they're afraid of getting scammed is a potential customer for a platform that can guarantee authenticity at scale.

But here's what AI won't change: the fundamental structure of commerce. Buyers need to find sellers. Sellers need to find buyers. Someone in the middle needs to facilitate trust, discovery, and transaction mechanics. That's been true since Mesopotamia, and it'll be true when AI agents are negotiating on our behalf.

Which brings us back to where we started. The grain traders in Ur. The Persian Bazaar. The Agora. Trajan's Market. The strip mall in Yarmouth. eBay. Amazon. The parking lot behind the Wendy's.

There's a popular myth in business that technology will eventually "cut out the middleman." It's one of those phrases that sounds revolutionary until you think about it for more than ten seconds. Because every time someone cuts out a middleman, a new middleman shows up — usually with a better app and a pitch deck.

Amazon cut out the bookstore. Then Amazon became the bookstore. Uber cut out the taxi dispatcher. Then Uber became the taxi dispatcher. Airbnb cut out the hotel booking agent. Then Airbnb became the booking agent and charged you more fees than the Marriott concierge ever did.

The middleman doesn't disappear. The middleman evolves. Because the middleman was never the problem — the middleman was always the solution to a coordination problem that both sides of the transaction would rather not deal with themselves. Sellers don't want to find buyers. Buyers don't want to vet sellers. Nobody wants to handle payment disputes. Nobody wants to build trust from scratch with every new transaction. That's the job. That's always been the job.

What changes is who gets to be the middleman, and how much value they have to add to justify their cut. The merchants in Trajan's Market paid rent to the state in exchange for foot traffic and security. Amazon sellers pay a 15% referral fee in exchange for 310 million active customers and two-day shipping infrastructure. The application has changed. But the premise is the same.

If you're building a marketplace, or investing in one, or just trying to understand how commerce works, the whole thing distills down to a few principles that haven't changed in 5,000 years. Add more value than you extract. Don't take on inventory unless you're prepared to be a retailer. Build something that both sides need for every transaction, not just the first one. And remember that your real competition isn't another marketplace — it's the status quo of two people figuring it out on their own.

You can't cut out the middleman. You can only become a better one.

TL;DR: Medan Multiples are UP week over week.

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Wishing you formidable yet scalable R&D investments,

CJ