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💵 a16z’s Top Marketplaces

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The big idea
bobble heads

a16z’s ranking of 2020’s biggest marketplace platforms say a lot about the state of the world

If a hot new tech company isn’t backed by Andreessen Horowitz (“a16z”), is it really a hot new tech company?

The venture capital firm, which holds some $16.6B in assets, recently released its Marketplace 100 — a ranking of 2020’s biggest and brightest consumer-facing startups.

A few findings that made us do double takes:

  • Instacart accounted for 71.5% of the entire list’s GMV (Gross Merchandise Value, or the total dollar volume of transactions)
  • Edtech company Outschool saw the biggest leap in the rankings (+59 spots)
  • Good Dog’s breeder marketplace saw the 2nd-fastest year-over-year growth
  • The cannabis and collectibles categories saw Q4 GMV increase 35% and ~70%, respectively

The pandemic stung some marketplaces but boosted others

As we laid low at home, our behaviors changed and some marketplace categories experienced big drops: child care (-61%), ticketing (-52%), and office spaces (-30%).

But when COVID pushed us to get outside, engage in new ways online, and spend carefully, others got a rankings boost, including celebrity connector Cameo (+36), outdoor stay platform Hipcamp (+33), and wholesale retailer Faire (+35).

Trends shifted seasonally, too

  • In Q1, child care and ticket categories saw ~70% of their total 2020 spend
  • In Q2, celebrity engagement and cannabis delivery categories saw GMV jump 250% and 400%
  • In Q3, people focused on their homes, with furniture and moving marketplaces seeing 100% and 200% increases in GMV
  • In Q4, we went shopping, with wholesale spending up 350% compared to Q1

Per the a16z team, post-pandemic behavioral shifts could make for an equally juicy report come this time next year.

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  • Big players working from home: JPMorgan, Salesforce, and PWC are just a few of the companies looking to reduce their office footprint in the wake of a 40% increase in office space available for sublease at the end of 2020.
  • Chinese tech giant Xiaomi announced plans to enter the EV market with a $10B, 10-year commitment.
  • Cameo gets celebrity status: AKA, it reached a $1B valuation. The platform lets 40k+ celebrities sell personalized videos to fans, like this viral one of singer Smokey Robinson wishing someone a “Happy Hanukkah.”
  • More Clubhouse competition: Following the introduction of Twitter Spaces and a rumored product from Facebook, Spotify is acquiring Betty Labs, the company behind live audio app Locker Room.
  • Dapper Labs (the team behind NBA Top Shot) raised $305m at a $2.6B valuation. Its cap table includes Michael Jordan, Will Smith, and Kevin Durant. (We covered Top Shot back in September, and the growth has been bonkers.)
  • Paypal will soon allow people to use their crypto holdings to pay for goods and services for millions of merchants across its network. This is a significant move by the $277B fintech firm to mainstream crypto assets.
  • Stacked: Newsletter platform Substack is raising $65m at a $650m valuation.
Ghost dashboard

Ghost: The open-source startup helping creators turn audiences into a business

With everyone and their mom jumping on the newsletter train, there’s been a dark horse that has bet on the creator economy for nearly a decade.

Ghost, which offers a suite of publishing tools for creators, vouches to help writers “turn your audience into a business.”

They’ve quietly scaled to $3m ARR, while enabling the creators on their platform to bring in $2.2m of their own. In a race with much bigger fish, Ghost has kept up through their unique business model (a nonprofit, open-source, fully remote company) that has been profitable since 2014.

The Hustle spoke with Ghost’s co-founder John O’Nolan after the company’s recent launch of Ghost 4.0:

Another publishing tool?

Prior to Ghost, O’Nolan worked as a web designer and developer. As he worked with the biggest fish, WordPress, he noticed that it was growing into a “platform for everything.”

He realized that there was space to build a tool for a single-use case: professional publishing.

Profitability in 11 months

Ghost didn’t try to reinvent the wheel. He learned from a business model that already existed in the WordPress ecosystem — a free open-source product — and managed hosting companies like WPEngine or GetFlywheel.

Their open-source product creates demand for hosting, while hosting funds the development of the product.

Ghost has scaled without paid ads or a sales team

O’Nolan says that marketing at Ghost is simple: focus on creating an excellent product, so that people end up sharing it for you.

They achieve this through: 1) thorough documentation; 2) tutorials; 3) a referral program.

The future of subscriptions

“I think subscription commerce is a sector that will be applicable to almost anything,” says O’Nolan. “Newsletters are a very hyped trendy bit, but I think longer term, we’re thinking about this as an agnostic technology layer that can really power all types of businesses.”

If you enjoyed this and want to catch the full recording, give Trends a go!

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Ad Biz
Amazon ads

Ads could soon be Amazon’s most profitable business

This is a jarring stat.

Amazon’s advertising business brought in $20B in 2020, which is more than the sales of Snap, Twitter, and Pinterest… combined.

While Amazon bundles its ad business under the category of “other,” leading tech analyst Benedict Evans teased out the number and shows it has doubled in just the past 2 years.

The ad revenue is a drop in the bucket for Amazon…

… which generated $386B total revenue last year. However, the majority of those sales are from the low-margin retail business.

Evans estimates that Amazon’s ad division could bring in operating income as high as $13.6B, which is in line with Amazon’s cash-cow cloud business.

The result isn’t too surprising if you think about it

According to CivicScience, ~50% of online shoppers start their product search on Amazon.

With all of these people to buy goods on its platform, Amazon is happily selling its digital real estate to the highest bidder.

Research firm Marketplace Pulse recently did a teardown of Amazon’s website — and the results were eye-opening. Everything shaded blue in the image below is an ad.

THAT is jarring!

Ads have taken over Amazon (right) like it did on eBay (left) (Source: Marketplace Pulse)

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$101k/month selling… dried flowers?

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Hibiscus water

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AI fact of the day

The AI-powered language model GPT-3 is already being used by 300+ applications, according to tech analyst Azeem Azhar. While this uptake is impressive, Azhar notes that large-scale AI language programs have a long way to go.

The screenshot below is of Google Translate translating text from Hungarian to English… and it shows some clear-cut gender bias.

Source: Twitter / @GaryMarcus

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