The Business of Building the World's Biggest Online Swap Market
By Jeff Bennett, CEO, Swap.com, Boston, Mass.
I'm the CEO of Swap.com. We've set out to become the largest online swap market in the world. We let people list their unwanted items, like music and movies, on our website and swap them for stuff they do want.
Our business model requires users to place a great deal of trust both in our company and in other users -- after all, no one will agree to send goods or submit his credit card details if he isn't absolutely confident that the transaction will go according to plan.
Our biggest challenge was the fact that most people are used to swapping their stuff offline and with friends, co-workers, or family members. We needed to build a similar community of trust among members as if they were swapping with friends -- but also enable them to expand their trusted network to millions of people online across the U.S.
Try before you buy
Swap.com makes money primarily through small transaction fees, which are typically $0.50 or $1 per swap. We wanted to keep fees low enough that users wouldn't be put off. But we've found that it's still a challenge to get first-time users to pay that fee if they're not entirely comfortable with the swapping process yet. When we relaunched last year, we knew we needed to make that first swap as easy and risk-free as possible to earn trust from new users. So in October 2010, we decided newcomers could make their first swap for free -- with the exception of shipping fees.
We don't make a profit from that first swap, but we see it as an investment in our model. Our hope is that users will have such a positive experience that they'll be willing to pay for future swapping activities. The overwhelming majority of first-time swappers do just that.
Maintaining a good reputation
Attracting new users is one thing, but keeping them is a lot harder. Our business model only works if both the company and its users stick to their promises.
To help keep swappers honest, we let them rate their experiences based on the timeliness and quality of the items received. If someone lists their books as being in "perfect" condition, but the pages frequently arrive wrinkled, that user would receive low ratings and other users will be able to avoid swapping with him in the future.
We prefer to let our users direct things, but if someone doesn't receive an item as part of an agreed-upon swap, she's protected with our SafeSwap guarantee. We'll charge the offending user's credit card for the cost of purchasing a new copy of the item for the other party. And in the event that the credit card details we have on file are no longer valid, we'll cover the cost of the replacement ourselves. Keeping our users' experiences positive is worth losing a little money on the deal.
Giving back
I believe in using our platform to do good. It does more than create a positive impact -- it also increases our credibility and user base as the word begins to spread.
We launched a charitable initiative just over a month ago as a direct result of user feedback. We knew that teachers and librarians often looked through our site to find books for their schools, so we built a donation arm of the site for them called Swap4Schools.
Teachers can list the books that they're looking for, and if another member has them, she'll be given the option to donate them. It's a completely grassroots initiative at this point but we've already facilitated about 2,000 book donations. We're delighted by the response, not to mention how it's helped build trust in our site.
In the year since re-launching the site, our user base has more than doubled, from 500,000 to over one million registered users. We're confident that by focusing on building an atmosphere of trust, we can continue to grow exponentially.
Jeff Bennett formerly served as president and COO of NameMedia.
-- As told to Kathryn Hawkins
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