The implication of a single buyer or seller purchasing an online marketplace

The value proposition of an online marketplace is that it aggregates demand on one side, supply on the other, and makes it easy for both sides to find and transact with each other.

In other words, the value of an online marketplace comes from the fact that it serves more than a single buyer or a single seller.

As a result, when a single buyer or a single seller purchases an online marketplace company, even if this buyer or seller is big, it’s likely that the marketplace did not live up to its potential. If it had, its value would have been much greater than that which a single buyer or a single seller would have been willing to pay.

Ikea’s recent purchase of Taskrabbit seems to be an example of this.

Taskrabbit freelancers offer services in areas like furniture delivery and assembly to Ikea customers. However, they also offer these services to customers of furniture retailers other than Ikea. In addition, they offer services in many other areas, like home repair, yard work, and house cleaning.

In other words, Ikea’s customers, taken together, effectively represent a single buyer on Taskrabbit. As a result, the price that Ikea would be willing to pay for Taskrabbit would be limited to the value that this single buyer gets from the marketplace. And this value is a fraction of the total value of the marketplace.

The fact that Ikea purchased Taskrabbit despite the former’s status as a single buyer suggests that the latter achieved a fraction of its potential.

Also published on Medium.