How can an intermediary service protect itself from “bypassing” transactions?

Online “markets” (from Craigslist to eBay and Airbnb, among many others) make money by allowing buyers and sellers to find each other. Many early similar services like Craigslist were simple bulletin boards, but more attractive transactional and end-to-end models are growing, and we assume that in the end they will dominate.

But such models have a key risk: disintermediation, in which the buyer decides to work directly with the seller instead of using the platform (for example, he finds an apartment owner on Airbnb and then negotiates with him directly outside the site, avoiding a commission). With sites like Craigslist, this was not a big problem, because they take money to place an ad and get their income as soon as it appears. And from the transactional market, accommodation is usually free, so Airbnb does not receive money until payment is made. And if it happens “somewhere outside”, then it does not receive them at all.
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Transactional markets should prevent (and even better prevent) disintermediation in order to protect their incomes. Thanks to our experience of investing in several pioneers of the direction, we became acquainted with some clever ways to fight:

1. Establish the correct level: to determine the correct amount of commission for your market is more an art based on experimentation and competition than exact science. The general theory is that there are markets with a higher commission, where the buyer does not know the identity of the seller (for example, Crown and Caliber ), and from low, where he knows (for example, Tradesy ). When the seller and the buyer know each other, the risk of using “workarounds” increases, so the commission should be lower. Accurately chosen level of commission allows you to avoid not only disintermediation, but also overpriced prices for goods that deter buyers.

2. Owning a communication channel: if a traveler wants to book a room on Airbnb, he has no choice but to use Airbnb communication. Any attempt to do otherwise is cleverly blocked: phone numbers in messages are calculated and deleted, like email addresses. Even attempts to give your last name (so that a person can find you on LinkedIn or Facebook) are often stopped. And Uber, using the Twilio service, provides drivers and passengers with a temporary phone number, which later stops working, preventing them from contacting again. Closed communication can be an additional advantage for customers, if it is done conveniently, allowing you to find all the details of the transaction in one place. It also allows the service to detect fraud, abuse and signs of disintermediation.

3. Giving “not only connections”: the main value of the market is that it allows supply and demand to find each other and establish a connection. But when the service grows and begins to offer additional capabilities of any of the parties separately, it becomes even more valuable. For example, on the site for selling unused gift cards Raise.com, sellers get a panel that shows all their sales, the best-selling options, the average time spent on the sale for cards of different brands. These free features are only available for transactions that go through the service. If the seller contacts customers bypassing Raise.com, then he loses the ability to track this data.

4. Inventive control approach: the Aristotle Circle service for teaching services does not want teachers to work with clients in addition to the classes officially recorded in the Aristotle Circle. To achieve this, the company uses regional field coordinators who help recruit teachers. Usually these are active parents participating in relevant organizations that keep their ears open. If they hear that the parent hired one of the company's teachers, bypassing her, they loudly say so - the service uses social pressure to combat potential disintermediation.

5. Use a rating / experience system: never underestimate the value of a good reputation. If there is a rating system, buyers and sellers will go all out to get good ones. Transactions that take place outside the service are usually not taken into account in experience indicators and do not give the buyer and the seller the opportunity to recommend each other. If the service is designed so that the best ratings lead to greater visibility in the search results, it will effectively encourage sellers to rely on the service for all transactions.

The most “bulletproof” markets are end-to-end models. They play such a critical role in the process of providing services that customers often do not perceive the company as a market, and, last but not least, do not have access to the network of suppliers, so there is no place for disintermediation to come from. But not all services can be built this way, so for many others the need for means of struggle remains high.