Being a marketer in the era of the sharing economy has certainly had its themes. About four years ago, I started receiving numerous questions about how to build customer acquisition for community-based apps. The one that really stands out was a wine app that connects customers with bars that are throwing events in the area. The problem was, they needed to prove to the bar owners that they could bring an audience before the bar partnered with them. But of course, they couldn't drive customers to an event that didn't exist if the venue wasn't onboard...

Classic chicken and the egg syndrome!

Since around 2010, we've all sat back and watched the sharing economy model change our business landscape. By mid 2015, the sharing economy had already created 17 billion-dollar companies, out of which 10 were unicorns, including Uber, Airbnb, TransferWise, Lyft and FundingCircle. These almost overnight success stories have ignited a flame in the entrepreneurial community. We have solutions to share just about anything now - cars, community centers, our homes. We can order babysitters, handymen, housekeepers, cooks, even massages - all through the click of an app.

And that's not all. According to Business Insider, millennials are no longer buying cars because of the sharing economy. They're placing more emphasis on "sharing, bartering and trading" and less on ownership than generations before them. Yet Uber's catastrophic $708 million loss in the first quarter of 2017 has been a hot topic of conversation for the last six months or so.

Then there's that umbrella-sharing company in Shanghai that lost all their umbrellas, increasing legislation hampering Airbnb's growth in certain regions, and other horror stories emerging from the sharing economy. But despite all this, I still think as a society we want the sharing economy to work. Some even want it to become the new normal. So we press on and find out how we might be able to create profitable business models that don't burn through capital more quickly than its recouped, or come with insurmountable risk.

In order for sharing economy business models to work, they have to build smart - being efficient with their budgets and creating scaling solutions that work (quickly!). This foundation has to be laid from day one. So, going back to that "chicken and the egg" syndrome I was talking about. Companies can build a solid foundation that allows them to manage growth sustainably by how they choose to scale.

Just take a look at the hugely successful design platform, Envato, founded in Australia back in 2006. While the company's headquarters are located in Melbourne, its 300+ staff is distributed around the world. Envato now manages seven marketplaces for digital creatives, covering everything from stock video and audio to graphic templates and WordPress themes.

I sat down with Collis Ta'eed, Envato CEO, to ask how, in an experimental economy, the company has managed sustainable and scalable growth.

"We take great pride in the results of the revenue sharing model we have with our community of authors," he told me. "Over the lifetime of the company, we have paid out more than $500 million dollars to the creatives who have sold items on our marketplace. We're up to more than 6 million customers with a combined 40 million purchases across our seven marketplaces."

The numbers are certainly impressive now, but like all sharing economy startups, Envato faced the chicken and the egg challenge in its early years.

"Customer acquisition is always hard," confesses Ta'eed, "and in a marketplace business, it's a critical service you're providing to your sellers, so you have to get it right."

Since Envato trades in digital content, the company's strategy has always been largely based on organic search and online affiliates. "Getting momentum in search listings is one of the most challenging aspects of this strategy," he shares. "When you first start, your web property isn't well indexed or ranked because there's no reason for search engines to see you as an authority. So the great challenge is to create that authority. The best approach we found was to provide unique and valuable content, slowly building authority."

He admits that the chicken and the egg problem of getting a marketplace started is "incredibly difficult to overcome." But that the approach taken by Envato was always on scalable growth and ensuring that both client and supplier needs were met.

"We would alternate between focusing on customer growth and supplier/content growth. In the early days we didn't have the resources to do both, so we started first with content listings, then to customers, then back to content, and so on. Essentially our thought process was 'Let's find something to put on this marketplace to sell, then let's find someone who wants to buy it.' Once we had done that, we went back and said 'Let's tell sellers about the success of our first sales and see if we can get them to create more content.' And so on."

Today, Envato is divided into a buy-side division for customers, and a sell-side division who look after suppliers, uploads, and so on. "Together," says Ta'eed, "these two groups build on our two-sided marketplaces."

So, despite recent issues and less-than-utopian scenes to come out of the sharing economy, is it here to stay? Ta'eed thinks so, although perhaps not entirely in the way it looks now. "Digital marketplaces are one of the backbones of the internet economy. But, one of the challenges of marketplaces is the massive profusion of choice they can sometimes create. Over time you get huge marketplaces with lots and lots of listings and sellers. We're seeing more and more marketplace entrants looking to create marketplaces that rely on more heavily curated pools of sellers to create a differentiated offering."

To keep afloat and thrive in the sharing economy then, one must plan on scalable growth, to be able to attend to all stakeholders while expanding. And then to constantly look for ways to improve your business offering to compete with new entrants and build a reliable marketplace that customers trust. "It's a tricky challenge," he says, "but one we're keen to explore in order to continue to provide great customer value."

Published on: Jul 18, 2017