The Rise of Facebook Marketplace and the Fall of Yahoo: A Tale of Two Tech Companies

Kazuki

Hatched by Kazuki

Jul 08, 2023

4 min read

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The Rise of Facebook Marketplace and the Fall of Yahoo: A Tale of Two Tech Companies

In the world of technology, fortunes can change in an instant. Two companies that have experienced both success and failure are Facebook and Yahoo. The inside story of Facebook Marketplace reveals how the social media giant tapped into the power of commerce, while the downfall of Yahoo can be attributed to its inability to embrace its true identity as a technology company.

Facebook Marketplace has become a force to be reckoned with in the e-commerce space. With over a billion monthly active users, it has surpassed the likes of Snapchat and Twitter combined. The initial research studies showed that Facebook was a popular platform for buying and selling goods, especially in countries outside of the Western markets. This insight was crucial in shaping the development of Marketplace.

To encourage commerce within Facebook groups, the company allowed group admins to opt into becoming classified commerce groups. This move enabled them to track organic behaviors and rank group content to help users discover products for sale. By prioritizing supply and getting sellers on board, Facebook was able to create a robust marketplace that attracted buyers.

One of the key factors that contributed to the success of Facebook Marketplace was the focus on trust. Buying and selling face-to-face requires a level of trust, especially for bulky items that require in-person meetings. By allowing users to see real identities and the duration of their presence on the platform, Facebook instilled confidence in its users. This was a unique selling point compared to other anonymous platforms.

Integration with Facebook Messenger also played a crucial role in facilitating communication between buyers and sellers. The ability to pin locations, send deposits, and easily coordinate transactions made the process seamless and efficient. This integration added an extra layer of convenience for users.

Furthermore, Facebook leveraged its existing community of groups to promote people-powered commerce. The idea of buying from neighbors and reducing waste resonated with users. Trust played a significant role in this aspect as well, as users felt more comfortable knowing that potential buyers or roommates had mutual friends or a long history on the platform.

In contrast, Yahoo's decline can be attributed to its failure to embrace its true identity as a technology company. While Google focused on extracting the full value of traffic and revolutionized the way ads were sold, Yahoo was content with the easy money it was making. Advertisers were already overpaying for ads on Yahoo, and extracting the actual value would have meant lower profits for the company.

Yahoo's revenue growth was fueled by a de facto Ponzi scheme in the late 90s. Investors were excited about the internet and poured money into new startups. These startups then used the funds to buy ads on Yahoo, generating more revenue for the company. This cycle further convinced investors of the internet's potential, but it also distracted Yahoo from the potential of search.

While Google recognized the value of search and focused on improving its search engine, Yahoo was more concerned with driving traffic through banner ads. This lack of focus on search proved to be detrimental to Yahoo's long-term success. Google's ability to adapt and evolve as a technology company set it apart from Yahoo.

One of the key differences between Google and Yahoo was their approach to programming. Yahoo treated programming as a commodity, with product managers and designers controlling user-facing software. Programmers were seen as mere translators, tasked with turning designs into code. This approach led to the hiring of mediocre programmers, which ultimately sealed Yahoo's fate.

In contrast, Google embraced a hacker-centric culture. They understood the importance of hiring talented programmers and creating an environment that fostered innovation. Good programmers want to work with other good programmers, and Google's hacker-centric culture attracted top talent. This emphasis on technical excellence set Google apart from Yahoo and contributed to its success.

To learn from these stories, there are three actionable pieces of advice that can be gleaned. Firstly, following the data is crucial for product iteration and evolution. Facebook Marketplace's success can be attributed to its ability to listen to user feedback and adapt accordingly. Secondly, understanding the importance of different devices is essential. While Facebook Marketplace started as a mobile-focused platform, the addition of a desktop version expanded its reach and made listing easier for high-volume sellers.

Lastly, navigating scaling is crucial for long-term success. Both Facebook Marketplace and Yahoo faced challenges related to violations and transaction measurement. Encouraging users to report transactions, incentivizing ratings, and reviews helped address these issues. Building a robust system to handle scaling and user-generated content is vital for any platform's growth.

In conclusion, the rise of Facebook Marketplace and the fall of Yahoo highlight the importance of staying true to one's identity as a technology company. Facebook's focus on commerce, trust, and community, coupled with its ability to iterate and adapt, propelled Marketplace to success. Meanwhile, Yahoo's failure to embrace its true identity and attract top talent ultimately led to its decline. By learning from these stories, other tech companies can navigate the ever-changing landscape and set themselves up for long-term success.

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