This is the first article about Horizontal Marketplace and Classified platforms. In general, I'm planning to commit to three articles. The second one will be a performance analysis and comparison (already available), and in the third article, I will try to forecast the possible evolution paths of both platforms. Let's start from the beginning.

Which platforms can be called Horizontal Marketplaces and which Horizontal Classifieds? Sometimes it is extremely hard to distinguish them. Moreover, during my research, I have noticed that even some VCs with astonishing track records have difficulties finding the difference. The whole problem arises because, in many cases, classified platforms use tools that typically fit marketplaces better, and vice versa.

A textbook example of a typical Horizontal Marketplace platform is Amazon. Amazon platforms are the best known and most successful of all Horizontal Marketplaces on the internet. However, they are not the only ones. When it comes to Horizontal Classified platforms, the best example would be Craigslist, which is probably the most famous classified platform in the world.

To make a large and comprehensive comparison, I am going to create a list of features and rules characteristic of both types of platforms. Unfortunately, some terms may be incomprehensible because the whole topic is quite complex and requires some industry understanding. However, I will try to put it as simply as possible.

So, what are the differences?

Horizontal Marketplace Platforms:

• Horizontal Marketplaces are usually more focused on a narrower range of goods. They typically aim at items that can be delivered directly to the buyer. The main aim of these platforms is to sell the items or, in other words, to finalize the transaction.

• Horizontal Marketplaces usually offer end-to-end transactions, allowing the buyer to "Buy Now," make the payment, and order the delivery, all within the platform. Some Horizontal Marketplaces, for certain goods, also offer advertising without the "Buy Now" option, such as for cars, if they have this category.

• Horizontal Marketplaces typically provide guarantees for the goods they sell (whether through the seller or not). They also offer the possibility to return items and ensure that transactions are safe. Most Horizontal Marketplaces include all these functionalities within their platform.

• Horizontal Marketplaces typically work predominantly with professional sellers (companies). Occasionally, they may also sell their own goods as a seller. Private sellers (non-professional) sometimes have the opportunity to sell their items on the platform as well, but the main focus is always on professional sellers.

• Horizontal Marketplaces typically have multiple sources of income. They may charge fees for listing items for sale, take a commission when an item is sold, offer internal paid services to promote and enhance the visibility of goods on the platform and earn from item delivery services. Some marketplaces may also have additional unspecified fees (service fees). Horizontal Marketplaces that allow ad posting (without “Buy Now” option) in certain categories may have additional revenue streams similar to Horizontal Classifieds, but these usually contribute minimally to their overall revenue.

Horizontal Classified Platforms:

• Horizontal Classifieds typically offer a wide range of items, including everything from mobile phones and job offers to apartment rental listings. The main aim of these platforms is to advertise and promote items, essentially connecting sellers with buyers.

• Horizontal Classifieds rarely offer end-to-end transactions. Typically, the buyer needs to contact the seller and finalize the transaction outside the platform. However, some Horizontal Classifieds are starting to experiment with a "Buy Now" option, but this is not yet common practice across the board.

• Horizontal Classifieds very rarely provide guarantees for the goods listed on their platform. Even if the transaction is conducted end-to-end, guarantees, transaction safety, and the possibility of returns are usually limited or not provided at all.

• Horizontal Classifieds usually work with anyone who wants to advertise their items on the platform. However, they typically do not have their own goods listed on the platform.

• Horizontal Classifieds usually have fewer sources of revenue. Most of them charge sellers for posting ads, while some offer free ad posting services. They may also provide internal paid services aimed at promoting and improving the visibility of ads. Additionally, many use external ads such as Google Ads, which can sometimes be prevalent on the platform. Horizontal Classifieds that are experimenting with end-to-end transactions in certain categories may have additional revenue streams similar to Horizontal Marketplaces, but typically, these contribute minimally to their overall revenue.

Let's summarize:

In my opinion, these are the most important differences between Horizontal Marketplace and Horizontal Classified platforms at the moment. However, it should be noted that both types of platforms are evolving rapidly. They are actively seeking new streams of revenue, so in a few years, we may see a completely different set of services.

About the author

Mark Malinovski

mark@tonrock.com, if you have any questions, don't hesitate to contact me.

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