All in all a great article, but I'm confused about why the small and quirky argument ("marketplace enormity doesn't increase the pleasure of the buyer") applies to Etsy or Threadless but not to Craiglist or EBay. If I'm in the market for miniature porcelain cows ironically dressed as farmers and find them on EBay, what do I care if EBay has 3 other listings or 3 million?
I understand that at their current level of maturity the value of EBay and/or Craiglist is partially tied to the size of the marketplace and that focused-and-better may be the best or even only way to compete with them but it seems like on that particular point what works for you, the small emerging marketplace could work just as well for them, they just have a higher overhead to meet. It's not enough just to be more focused, you need to be better at your niche.
>> "marketplace enormity doesn't increase the pleasure of the buyer"
You're asking why it's a negative for eBay and Craigslist that they aren't small (i.e., that they have a lot of listings), but I think the quote you took from the article is saying the inverse - that it's not necessarily a negative for Etsy and Threadless that they are small. In fact, I think Jason does recognize that being bigger is an advantage:
>> "Clearly the value of a marketplace increases as it grows — both as a business and to the buyers and sellers."
As to your second paragraph, I agree it comes down to you meeting the needs of your niche in some way that is better than the way the big boys are doing it (that is, of course, if you are competing directly with them). There is nothing, in principle, stopping them from replicating whatever you do to create an advantage. And you certainly won't win just because you have a smaller market. But there are a lot of products (like the t-shirts on Threadless) where relative obscurity increases the value of the product. There will always be consumers who shy away from the mainstream offerings, in some cases because the offerings are mainstream.
I understand that at their current level of maturity the value of EBay and/or Craiglist is partially tied to the size of the marketplace and that focused-and-better may be the best or even only way to compete with them but it seems like on that particular point what works for you, the small emerging marketplace could work just as well for them, they just have a higher overhead to meet. It's not enough just to be more focused, you need to be better at your niche.