Solving the problem of disintermediation
One of the issues marketplaces have historically faced is one of disintermediation. This is when buyers and sellers leave the platform to make the exchange, meaning the marketplace can’t take their cut. That’s a fundamental problem with the rake (the rake is the percentage you take as a platform).
Obviously, it’s not problem enough for people to abandon the model. This is what most marketplaces do, but it tends to put a ceiling on the size of project a platform would offer. A wise client would find a good freelancer on a small project and then use them for the big one off platform. The client pays less and the freelancer gets more.
Bedrok makes it nearly impossible and unnecessary to disinteremdiate for two reasons. First, the impossible reason:
Bedrok is a one to many marketplace, not one to one.
Typical freelance platforms have you hire a single freelancer to do your work. Even on a platform like 99Designs where multiple designers compete, only one is needed to complete the design for the client. This makes it easy to communicate because there’s only one person to talk to. A single email is all you need to take it off platform.
Bedrok is different because you work with multiple freelancers on a single project. It’s built that way so we can deliver any size project in a day. Each designer is a part of the system, and you need all the parts to come together to deliver on the client value proposition (Post a project of any size and have it done today).
It’s already difficult enough to work with 5 or 6 other freelancers, but imagine when projects get so large that you need upwards of 25+ freelancers. There’s no chance you’re going to be able to create the same value proposition that we offer on your own. Even if you’re not trying to get something done same day, contacting all 25 and getting them to work on a project on your own is difficult. Paying them would also be a nightmare.
Second, it makes it pointless to disintermediate for this reason:
We take 0% commissions
A money hungry person might say “If they can’t go anywhere, charge a fat rake!” However…
There’s a great article titled “A rake too far” by Bill Gurley that explores how marketplaces should rake. He mentions three important things:
- “There is a big difference between what you can extract versus what you should extract.”
- He brings up Peter Drucker. Drucker wrote somewhere of the 5 deadly business sins, and number one is the worship of high profit margins and premium pricing. Drucker notes: “The worship of premium pricing always creates a market for the competitor. And high profit margins do not equal maximum profits. Total profit is profit margin multiplied by turnover. Maximum profit is thus obtained by the profit margin that yields the largest total profit flow…”
- Thirdly, he says, “Most venture capitalists encourage entrepreneurs to price-maximize, to extract as much rent as they possibly can from their ecosystem on each transaction. This is likely short-sighted”
So even though I could charge a high rake, my desire isn’t to maximize profit margins. And it seems like a punk move to charge so much when they can’t disintermediate in the first place.
It’s my desire to make a freelance commissionless marketplace. But I need to figure another way to capture that value add, and I think it’s through the subscription model.
Jeff Bezos has a quote on making money when people use their product, not when they buy it:
“We want to make money when people use our devices — not when people buy our devices.”
That’s the philosophy that most marketplaces have. Charging for use is taking a percentage of profits. However, making money when people “buy the device”, or in this case, buy access to the platform, is the opposite. This isn’t a particularly important thing to note, but I thought it was interesting to take that model Bezos uses and apply it to marketplaces.
My main motivation for not taking a rake actually isn’t related to profit, but psychology.
I think the psychological benefit freelancers derive from knowing that none of their money is taken would create strong brand loyalty. Especially if I’m the only one doing it.
“If Bedrok provides me consistent work, and they don’t take part of what I earn on each project, I like them a lot.” That’s what I imagine people would think.
The subscription model wouldn’t be as lucrative as the rake model. But I think the former would create more brand loyalty, thus increasing profits in the long term. And if I have to exchange short term profit for long term brand loyalty, I’ll do that all day. The assumption is rooted in what I, as a freelancer, would like to have on marketplaces. I don’t like when the platform takes a chunk of what I earn! It makes sense logically why they do it, but that doesn’t make me like it any more.
