Marketplace Growth Metrics: What to Track and What to Ignore

Want the full story? Listen to my complete interview with Adam Miller, where we discuss marketplace growth metrics, supply-side economics, and the future of AI in marketplaces.

The world of marketplace metrics can feel like drinking from a firehose. Trust me, I’ve been there. After interviewing Adam Miller (who’s helped scale giants like Uber, Postmates, and Turo), I wanted to break down the essential metrics that actually matter for marketplace growth - and which ones you can safely ignore.

The One Metric That Rules Them All: Utilization Rate

Let’s start with the single most important metric for any marketplace: utilization rate. As Adam explains, “The KPIs I think everyone should be looking at is, you know, the number one is utilization rate… It really affects immature amateur companies alike. It really is an evergreen metric.”

But what exactly is utilization rate? Simply put, it’s the percentage of your supply that’s actually being used. If you’re running a car-sharing marketplace like Turo, it’s the percentage of listed cars that are actually being rented. For a service marketplace like TaskRabbit, it’s the percentage of available service providers who are actively completing tasks.

Here’s why it matters so much: utilization rate is your canary in the coal mine. If it’s too low, you’re wasting supply (and probably losing suppliers). If it’s too high, you’re leaving money on the table and risking losing customers who can’t find what they need.

The Perfect Utilization Rate Myth

Now, you might be thinking “Great, I’ll just aim for 100% utilization!” Not so fast. As Adam points out, the ideal utilization rate varies dramatically depending on your marketplace type:

• For commoditized services (think Uber): You can push utilization rates quite high
• For unique offerings (think Airbnb): Even 10-15% utilization might be healthy

The key is understanding your market dynamics. If every unit of supply is interchangeable (like Uber rides), high utilization makes sense. But if each unit is unique (like Airbnb properties), you need slack in the system to maintain variety and choice.

The Demand-Side Trap

Here’s where many marketplace founders have fallen into a trap: over-focusing on demand-side metrics. As Adam warns, “I think it’s a little bit of red herring… You obviously need to be growing demand. But I think it can become a fixation point, especially if you are running out of supply.”

Think about it this way: you can pour unlimited resources into demand generation, but if you don’t have the supply to meet that demand, you’re just burning money and potentially damaging your brand.

The Three Pillars of Marketplace Success

Through my conversation with Adam, three core imperatives emerged for any successful marketplace:

1. Supply Management: “Supply is the lifeblood of any marketplace. Without it, no transaction can possibly be consummated.”
2. Trust and Safety: “No one will ever use your platform unless they feel like they can trust it… It’s the fail safe that says if something goes wrong, we are here to fix it.”
3. Liquidity: “You cannot have a marketplace unless you’ve effectively managed your liquidity. Matching supply and demand is really what marketplaces do.”

The AI Revolution in Marketplace Metrics

One fascinating insight from our conversation was how AI is reshaping marketplace metrics. As Adam explains, “AI is going to compete away a lot of advantages. The one advantage it will most definitely not compete away is network.”

This is crucial: while AI might make it easier to build and operate marketplaces, the network effect becomes even more valuable. Your metrics should reflect this reality, focusing on:

• Network density in key markets
• Cross-side network effects
• Network defensibility metrics

What to Ignore: The Zero Interest Rate Hangover

Interestingly, Adam suggests that many traditional marketplace metrics were shaped by the zero interest rate environment:

“I think the idea of LTV is something that really came about during the zero interest rate era… these consumer marketplaces were really being built on a lot of very cheap money.”

This means we should be skeptical of metrics that:

• Assume unrealistic customer lifetimes (especially beyond 1 year)
• Don’t account for the cost of capital
• Ignore near-term unit economics

The Future of Marketplace Metrics

Looking ahead, Adam sees several key shifts in how we’ll measure marketplace success:

1. Increased focus on near-term unit economics
2. More emphasis on supply-side health metrics
3. Greater attention to network defensibility measures
4. Evolution of AI-enabled efficiency metrics

Practical Implementation Steps

So how do you actually implement this in your marketplace? Here’s a practical framework:

1. Start with utilization rate as your north star
2. Build your supply management metrics dashboard
3. Layer in trust and safety metrics
4. Add liquidity measurements
5. Only then look at traditional growth metrics

The Bottom Line

After diving deep into marketplace metrics with Adam, here’s my key takeaway: focus on supply health first, everything else second. As he puts it, “Supply is really the lifeblood of these marketplaces. And what ends up happening is that you cannot grow demand beyond a certain point unless you actually turn around and grow the supply side of the equation.”

Want to hear more insights from Adam Miller, including his thoughts on AI’s impact on marketplace businesses and the future of gig economy platforms? Listen to the full interview here.