<Is it okay for Korean startups? - Carrot Market episode>

<Is it okay for Korean startups? - Carrot Market episode>

Today is a day when I'm on the move all day (Arizona -> California), so I have time to run a series of "Korean Start-ups."

Carrot Market is a C2C (Consumer to Consumer) trading platform that aims for 'local'. In the early days, MAUs were grown centering on used (location-based) product transactions in the region, but recently, they are expanding to service transactions and job search, and I understand that MAUs have been steadily growing and stagnating. In fact, one of the reasons for the stagnation seems to be that almost everyone who can use it is using it.

As far as I know, a competitor can take the Lightning Market as an example, but as far as I know, the Lightning Market does not emphasize location base, so we have to mention the American Craigslist as an example of a similar C2C platform. Americans do all kinds of transactions through Craigslist, and Craigslist is a place where you can find used furniture transactions and roommates.

Carrot Market's sales in 2022 amounted to 49.8 billion won, which is a 94% growth, or double, compared to 25.6 billion won in 2021. On the other hand, operating expenses amounted to 96.2 billion won, up only 58% from 60.8 billion won in the previous year. Of course, it can't be as positive as operating expenses continue to far exceed sales, but it is expected that sales growth is sharply outpacing cost growth.

It can be seen that most of the sales are advertising revenue, and they are using 'traffic', which is the advantage of the C2C platform. Carrot Market is a local-based C2C platform, so there is inevitably a lot of traffic. Since this traffic is for 'transaction', it is assumed that the 'advertising unit price', which is important for profitability, has a structure that is inevitably okay. For this reason, it can be said that sales were able to grow to 40 billion won in a short period of time.

Most of the expenses were labor costs (34.5 billion won), payment fee (28.8 billion won), and advertising fee (22.7 billion won). I think they are using the advertising fee aggressively because they are still paying attention to the number of users, but they have maintained the same level as the previous year. The question here is the payment fee. Since I am not an insider at the carrot market, I have no idea how much I use the payment fee so much, but I will mention it because it has more than doubled from the previous year's 13.9 billion won.

In addition to labor costs, the cost I want to emphasize is the payment rent. I spent 3 billion won a year alone, and it can be seen that the rent of Kyobo Tower in Sinnonhyeon Station is quite strong. Carrot Market is a place where it is investing so strongly in human resources that it uses 37.5 billion won only for labor and indirect costs. As far as I know, Carrot Market is using two Kyobo Tower floors.

If you've read so far, you've noticed that unlike the first batter of the series, the Carrot Market is not so critical (though I remember my writing and various articles shedding light on his deficit like a comet on his YouTube channel) despite its operating loss of W46.3 billion, because the business model of Carrot Market is my favorite structure.

Carrot Market is a 'platform' company. In order for a platform company to operate effectively, it must provide value to users based on a sufficient number of users. Therefore, using 22.7 billion won in advertising expenses makes sense compared to 49.8 billion won in sales. If it is the same as a company that sells general products, it can be said that the gross profit margin is 54%. And the fact that sales doubled even though the advertising expenses were the same as in 21 years shows that the 'fly wheel', the flower of the platform business model, has begun to work.

Companies that have these structural advantages need to continue to increase their "intangible assets" to strengthen their platform lock-in effects and improve their products. That's why I'm not critical of the carrot market's enormous labor costs.

Considering that Craigslist in the U.S. once had sales of over W1.3 trillion (which is down these days, as many local-based C2C competitive platforms have appeared), the growth plate of the carrot market is still open, and 2022 seems to be a meaningful year to confirm that it has secured a structural advantage for the carrot market.