Marketplace Expansion (Part 1/3)

Marketplace Expansion (Part 1/3)

Blog Post
November 7, 2023

We're sharing a guest blog post from our community EIR Danny Martinez that's part of a series of posts on marketplace expansion. This was previously shared as a deep dive post in the community here.

Note that this is Part 1 for a series of posts covering marketplace expansion. This post covers specific marketing considerations when expanding into new markets.

For geography (geo) specific marketplaces that are lucky enough to hit product market fit (flattening retention curves, strong liquidity), the next question is usually when and how to expand into new markets. It may be tempting to think this is as being as easy as hiring a market launcher for a new geo, giving them a budget, and then sitting back and watching a new market takeoff. In reality though, this process is much more nuanced, and there are many pitfalls to watch out for.

In a series of posts, I’ll cover how different marketplaces have approached expansion into new markets (cities, regions, & countries). I’ll also break down expansion into specific considerations like marketing (this post), sales, product, and then even legal/compliance with a series of posts over the next few weeks. It’s also worth noting that new cities might not be too dissimilar, where as new regions or countries might be. Expansion into each of these have specific considerations, but I’ll keep this post more general to covering expansion with regards to marketing considerations.

Note that I recently asked community members to share their experiences from different marketplaces; the insights I gathered from
Houzz, Reverb, Zulily, and Outdoorsy will be used in this post, as well as from my own experiences at Airbnb.

To start with, there are many approaches you can take from a people perspective when opening a new market. You could in theory assign the task of "launching" to someone from your central office or "HQ". You could also hire someone in the geo that you’d like to expand into and leave it to them as a "launcher". As I’ll cover below, which roles you resource from your HQ (i.e. centralised roles) vs. which ones you resource from the launch city (i.e. localised) is a nuanced one that takes careful consideration.

With that in mind, here are the 3 key considerations I’ll explore in this post:

  1. What roles are localised vs. centralised
  2. How to think about channel mix in different markets
  3. Brand marketing in new markets: Is it worth it?

What roles are localised vs. centralised

The common question of "which roles do we centralise?" is one I’ve contemplated several times, and it’s an especially important one for marketing. As always, your customer’s needs are a good compass to help guide you in making this decision; I’ll caveat this by saying that this is mostly a question of trade-offs rather than there being a "right way" of setting up your marketing org.

Matt Holder shared some insights in the community from his experience at Houzz, where he worked on international expansion more specifically and was involved in launching 10+ countries:

  • Setting up HQ: He recommends staffing up your team in HQ to avoid requests coming from international marketing teams falling to the back of the queue, whilst hiring a local team that can be an “extension” of your leadership team in HQ. It may be tempting to think you can hire people "in market" to be fully independent, but in reality this hardly ever works out.
  • Local marketing team: At Houzz each country/region had a small marketing team, depending on how homogenous the needs of the customer were, supported by the team in HQ. Having more creative teams (e.g. brand marketing) in-country with channel experts (e.g. SEO/SEM) in HQ is a common approach with i18n: creatives can use their local insights to design appealing campaigns, whilst the channels which are more about optimisation can mostly be handled centrally in partnership with local teams.
  • Brand messaging: being flexible on brand positioning when launching in a different market is crucial to a successful launch. Whilst you don’t want every country to feel like it’s a separate product, you also have to acknowledge the differences between customers in each country: whether it's local customs, cultural differences or language barriers, you’ll need to resonate to the needs of customers in a launch country.

"The biggest pain point I’ve seen with i18n is that while companies recognize the need to have country specific staff (either in HQ or within country or both) they forget to staff up other critical functions (product/eng/design/legal/etc.) to successfully operate and grow in launch countries .” -Matt Holder (prev. Houzz)

How to think about channel mix in different markets

In the same way in which you shouldn’t assume that your customers in different markets have the same needs, you shouldn’t assume that channels that work in HQ also work in your new markets (especially new countries with international expansion). For example, SEM might work really well in your HQ city, but you might have a lot more competitors in your launch city which makes it too expensive. Your channel “mix” (i.e. the proportion of marketing budget you assign to each channel) may require a lot of changes across different markets or regions.

Dan Orkin was responsible for growing Reverb in Europe (as well as Canada, Australia and Japan), and shared some lessons learnt:

  • Pre-marketing: Dan recommends focusing on product messaging and UX before thinking about driving traffic (e.g. are you using the correct currency format, is it properly translated?). Imagine spending resources on a campaign, getting good click through rates only to end up at a product that only ends up in raised eyebrows ("is this legit?")
  • Benchmark conversion: Is your website/product converting as well in your launch country? - benchmarking conversion/bounce rates to quantitatively establish whether your messaging is clear (and ready for traffic) is key, and will give you the confidence to know that you’re spending your marketing budget wisely.
  • Walk before you run: launching multiple countries at the same time may be tempting, but as described above, unless you’ve put the work in you’re simply setting yourself up to fail. In future, Dan will think about launch markets sequentially rather than in parallel; making sure that pre-work and benchmarking has happened for each launch.

"All the slick marketing and tailored messaging in the world will not overcome issues with product and UX, and this was a lesson I learned time and time again in the Reverb experience. Ultimately, we did not do a good enough thinking through the internationalisation of the site and app experiences for different regions and languages which resulted in lower conversion across the board in these areas." -Dan Orkin (prev. Reverb)

Brand marketing in new markets: Is it worth it?

Brand Marketing emphasises cultivating enduring relationships and emotional connections with customers, thereby bolstering awareness and trust over an extended period. It enriches a brand's overall perception and standing (e.g TV and out of home ads). Conversely, Performance Marketing leverages a data-centric digital strategy to target immediate outcomes like sales and sign-ups, offering tangible and immediate results designed to promptly convert prospects into customers (e.g. SEM and paid social).

I’ll caveat this part by admitting how wrong my initial thoughts related to brand marketing were. Let me explain: I’m someone that takes comfort in numbers and logic, but I’ve learnt multiple times in my career that not everything can be quantified and structured (if only!)

I joined Airbnb in London in 2016, fully enamored by the product: I’d been both a host and a guest and had loved my first experiences. The local marketing teams were heavily focused on brand marketing and ran some really inspirational campaigns (e.g. Airbnb floats a house on the Thames in London caught a lot of headlines at the time).

Of course, the data geek in me always questioned the return-on-investment (ROI) from these campaigns. Awareness & consideration surveys always fostered scepticism in me: can we really trust what people say in surveys? I initially concluded that whilst these were cool and inspirational, they probably were not moving the needle outside of the US, where the brand was stronger. Why not throw that money into measurable performance marketing campaigns with proper attribution, instead?

Over the years I’d learn just how wrong I was, with brand campaign after brand campaign that appealed to customers all over the world. One of the more memorable/successful campaigns was "live there", a campaign that differentiated the brand away from mass tourism and encouraged tourists to “live there” instead. As well as creating a genuine "feeling" amongst viewers, it also moved the needle on impressions, traffic and bookings significantly, across multiple markets (this campaign ran in the US, UK, France, Germany, Korea, China, and Australia).

Additionally, during the pandemic Airbnb famously shifted it’s marketing budget heavily towards brand marketing, it proved to be an approach they would stick to long after the pandemic (Airbnb CFO: We were right to shift spend from performance to brand-building).

It goes to show that if you can find the commonalities between your customers across different geos, brand marketing can indeed be a great way of moving the needle and driving awareness for your product/service.

Conclusion & takeaways

All in all, expansion is not an easy task, whether it be a new city, region, or internationally. While this post does help highlight more on the differences with markets for international expansion (since usually more dissimilar compared to new cities or even regions), there are 3 key marketing considerations to keep in mind when expanding as a marketplace:

  1. Centralization vs. Localization: Balancing roles between HQ and launch geos is key. Centralising technical functions like SEO/SEM, whilst using local expertise for creative campaigns to harness regional insights is usually the way to go.
  2. Channel Mix: Don't assume channels effective in HQ will work as effectively  in new markets. Prioritise local experience and product messaging before driving traffic, and launch geos after thorough preparation.
  3. Brand Marketing: Beyond the measurability of performance marketing, brand marketing builds trust and long-term relationships. Campaigns that resonate with universal sentiments, like Airbnb's "live there" campaign, can achieve success across diverse global markets.

It may be tempting to think that you can simply "copy & paste" your approach from your home market, but in reality there’s a lot more work required to guarantee a successful launch (and we’ve only covered marketing so far). Please let me know specific questions you might have on this in the comments below, your own experience, or if you’d like to chat through this more. I’ll also be sharing more in the next post for Part 2/3 soon!

You can connect with Danny to discuss this post in the Everything Marketplaces community here. A big thanks to Danny for also being an active EIR in the community, where he is often sharing his marketplace experience, insights, and helping early stage founders.