The Mesh - Lisa Gansky [44]
Prosper, the peer-to-peer lending firm, discovered a niche opened up by the banking crisis. With people’s confidence waning in the big banks, some turned to Prosper as an alternative. Also, as the market restrained smaller banks from making local loans, Prosper was able to fill part of the gap. Some of the banks themselves turned to the company for help.
Niches often occur when customers are restless about current choices, as they were with the banks. Similarly, Etsy is a craft exchange that grew after finding a specialized community of customers on eBay a few years ago. A big challenge for a company like eBay is to retain early and important customers while trying to scale to get more. Companies deal with this issue in different ways. EBay acquired PayPal, which enhanced its platform, tightly integrated its core transaction services, and provided a whole new world of data to its merchants. The company also expanded regionally and into vertical niches, such as the wildly successful eBay Motors. But as it grew, eBay could offer only limited customization to smaller audiences.
Etsy’s founders took advantage of this business phenomenon. They noticed that there were a lot of crafters on eBay who make jewelry, clothing, housewares, gifts, hats, and specialty items. They were buying, selling, and talking to each other, and were keen to create a crafter-centric experience. Etsy identified the crafters as a growing niche and launched a platform crafted specifically for them. Etsy charges crafters less money than eBay does but still makes an impressive profit. It’s a good example of a company that basically says, “I can cater to your special needs better than those bigger folks can.”
Etsy found a niche and created a Mesh-style share platform for a community of creators. A disproportionately high number of members of the Etsy community are also buyers within the community. In this way, they recirculate money back to the community, empowering other crafters. Members share money, knowledge, and the crafts themselves. Crafters get together to make co-offers such as, “I’ll make a hat if you make a sweater.” Or, “I’ll throw the jewelry in if you make that outfit.” Etsy is currently working toward more robust social networking. Say a guy in North Carolina is looking for a gift for his wife, and she really likes llama wool.
CASE STUDY:
Prosper
By 2006, Chris Larsen saw the makings of a perfect storm. Borrowers in the United States had gained access to their credit scores for the first time a year earlier. A few years earlier, a nationwide electronic funds transfer system called the Automated Clearing House (ACH) came online. Social networks were taking off. The stage was set, Chris thought, for profitable peer-to-peer (p2p) lending.
Having just sold a venture, E-Loan, Chris cofounded Prosper, a p2p lending marketplace, with more than $40 million in venture capital funding. Prosper offers a convenient and transparent way to get a personal loan or invest in loans on terms considerably more favorable than those banks are offering. Prosper’s registered members request loans or bid on them through an online auction platform. Perhaps someone is starting a landscaping business, or a family is paying for their daughter’s college tuition. Borrowers describe how they will use the money and denote the highest interest they are willing to pay. After considering the borrowers’ personal stories and proposed return, lenders select loans from the listings and bid on them in increments of $25