Melbourne has seen the birth of three ‘Unicorn’ startups (seek.com.au, carsales.com.au and realestate.com.au), more than any other state in Australia. All of these Unicorns are various forms of online marketplaces - this is not too surprising, given the scalability of marketplace business models and the sizeable profit margins that they offer.

carsales.com.au home page
carsales.com.au home page (Image: carsales.com.au)

“The Digital Marketplaces sector has attracted attention amongst entrepreneurs in recent years due to its attractive business model: Relative low cost of entry, high profitability (~70% gross margin for eBay, ~60% gross margin for Etsy) and sustainable advantage once network effects are achieved.”

Globally, 22 marketplace startups have achieved Unicorn status between 2011 and 2015, and Greylock Partners, a Silicon Valley venture capital firm, says that the number of marketplace Unicorns is expected to double by 2020.

Seek's offices in Melbourne
Seek’s offices in Melbourne (Image: Moda Design)

According to the report, Victorian marketplace startups have directly created over 13,000 jobs, and indirectly created work opportunities for over 80,000 individuals. In addition to this, they are estimated to have generated over $520 million in revenue in Victoria alone.

“[The Digital Marketplaces sector in Victoria] is attractive, fast-growing and an important contributor to Value Add and Employment...”

The carsales offices in Richmond, VIC
The carsales office in Richmond, VIC. (Image: Intermain)

The report states that “four generations of players have emerged”. Generation 1 being single-sided passive marketplaces, ranging up to Generation 4 with two-sided active marketplaces that provide support services to both sides of the market.

Whilst a lot of marketplaces use the listing fee and advertising revenue model, some marketplaces are ‘entering the transaction’ with commissions instead. This can especially be seen in large marketplaces such as Uber, Airbnb and Fiverr, that are dominating the entire market and taking a cut of each transaction. One of the major benefits of this model is that providers are not charged anything until they receive value from the marketplace. This results in the incredible growth rates that we have seen with Uber and Airbnb - the lack of barriers allow the marketplaces to gain new participants at an exponential rate.

For more details and insights about journeys of these Victorian startups, see the full report here: https://launchvic.org/

Notable marketplace startups in Australia: