The Composite Marketplace CAC Framework
by Dan Hockenmaier • Head of Strategy and Analytics at Faire
A renowned marketplace expert who previously worked at Thumbtack during its scaling phase and founded the strategy consulting firm Basis One. He is considered one of the world's leading authorities on marketplace dynamics, growth models, and unit economics.
🎙️ Episode Context
Dan Hockenmaier deconstructs the complex mechanics of building and scaling marketplace businesses, contrasting them with traditional SaaS models. He provides a masterclass on constructing growth models, defining true liquidity, and making high-stakes strategic decisions regarding verticalization and expansion.
Problem It Solves
Addresses the issue of over-spending on supply or demand in isolation without understanding the holistic cost of a transaction.
Framework Overview
A formula for calculating the true cost of customer acquisition in a two-sided marketplace by accounting for the interdependent cost of acquiring the necessary supply to service that demand.
🧠 Framework Structure
Calculate the direct CAC for the dema...
Determine the 'Liquidity Ratio'—how m...
Calculate the CAC for the supply side...
Sum these figures to get the Composit...
Push spending on both sides until thi...
When to Use
When setting marketing budgets or determining if unit economics are actually positive in a specific geography or category.
Common Mistakes
Optimizing for 'marketplace balance' ratios (e.g., 1:10) rather than optimizing for the ROI of the combined acquisition cost.
Real World Example
This approach allows companies like Uber or Faire to understand that even if Rider CAC is low, if Driver CAC is skyrocketing, the composite unit economics might be negative.
You need to include the CAC of acquiring that customer, but also the CAC of acquiring the supply for that customer to purchase... expressed as a ratio.
— Dan Hockenmaier