How Mobile Alters Traditional Network Effects In Marketplaces

TechCrunch

Editor’s Note: Semil Shah works on product for Swell, is a TechCrunch columnist, and an investor. He blogs at Haywire, and you can follow him on Twitter at @semil. (A special thanks to Simon Rothman, a partner at Greylock and a noted expert in marketplaces, for his help in framing this post.)

On the web, marketplaces are the stuff of legend. With properties like eBay and Amazon, among many other, an online marketplace harnesses the openness of the web, more efficiently matches supply with demand without too many intermediaries, and leverages network effects to capture economic value during each transaction. A key component for a marketplace to work, however, is liquidity — the comfort in knowing that for each item or request posted, there is a willing buyer at a certain price. Liquidity is what drives the engine of a marketplace, what keeps sellers…

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