The 7 Powers of Digital Business: A SaaS vs. Marketplace Lens

In venture circles, few strategy frameworks have endured like Hamilton Helmer’s Seven Powers. For over a decade, it has served as the definitive lens for understanding durable advantages in technology businesses, from scale economies to network effects. 

Most discussions, however, have centered on SaaS, a model built on predictability, recurring revenue, and rapid adoption, making it the default example of defensibility. Yet applying the same framework to digital marketplaces reveals that in most cases marketplaces score higher than SaaS, underpinning their endurable value to investors.

Our content piece reinterprets Helmer’s framework through the lens of marketplaces, comparing how each power manifests in SaaS versus marketplaces, thereby revealing where true durability lies in modern technology models. 

Next week we will share some thoughts on how AI changes the framework and its implications for investors.

1. Scale Economies

• In SaaS scale drives efficiency, not defensibility. As the customer base grows, cloud, R&D, and support costs are spread across more tenants, pushing marginal costs close to zero. This creates excellent unit economics but not a lasting moat. Competitors can often reach similar scale using the same infrastructure, which means cost leadership alone rarely becomes a source of structural advantage.

  
  

• In Marketplaces scale operates at a deeper level. It increases liquidity, improves matching quality, and reduces friction for all participants. A driver completes more trips per hour, a buyer finds inventory faster, and operational costs like fraud management and  fulfillment decrease as density rises.

  
  

2. Network Effects

• In SaaS we typically see only weak, intra-company network effects (e.g., Slack, Figma). Value increases as more colleagues join. This is useful for “land and expand” growth but doesn’t prevent competitors from selling to the company next door.

  
  

• In Marketplaces network effects are the moat. Each new buyer attracts more sellers, and each new seller makes the platform more valuable for buyers. As liquidity compounds, the marketplace becomes the natural destination for the category. A portal with the most listings draws the most serious buyers, which brings more sellers, relegating competitor platforms to dispensable add-ons.

3. Counter-Positioning

• In SaaS counter-positioning usually comes from a technical or pricing shift. Figma’s browser-based collaboration model, for example, challenged Adobe’s desktop-first approach. These moves can reset expectations but are often replicable once incumbents adapt.

  
  

• In Marketplaces Counter-positioning often occurs at the business model level. Airbnb didn't just build a better hotel booking tool; it counter-positioned the entire hotel industry by aggregating fragmented, non-professional supply. Incumbent hotels could not copy this without cannibalizing their core, asset-heavy, high touch, business model.

4. SWITCHING COSTS

• In SaaS switching costs come from workflow integration, data lock-in, and team familiarity. Once a product becomes embedded in daily operations, replacing it requires retraining, migration, and temporary disruption. This makes churn expensive but not impossible. When a better or cheaper option appears, switching can still be justified. The strength of this moat varies by depth of integration: a CRM like Salesforce is far stickier than a note-taking tool like Notion.

  
  

• In Marketplaces switching costs rise with dominance and liquidity. Once most buyers and sellers gather on a single platform, participation becomes economically rational and leaving becomes irrational. A freelancer with a hundred reviews on Upwork or a top-rated driver on Uber would be abandoning both demand and reputation to start fresh elsewhere. Similarly, buyers rarely leave the platform with the most trusted listings and active supply. In a mature marketplace, switching means abandoning the market itself.

5. BRANDING

• In SaaS brand builds credibility, not loyalty. It signals reliability and ROI, helping a product earn discovery and trust in crowded categories. The brand gets you considered, but purchase decisions stay rational driven by features, integration, and price. Giants like Salesforce or Microsoft sustain long-term trust, yet most SaaS brands operate in narrow niches where credibility helps win deals but rarely stops users from switching

  
  

• In Marketplaces branding is often a B2C or "Pro-sumer" habit. It's the "verb" in the sentence: "Just Uber it," "I'll check Airbnb," "It's on Amazon." This consumer-grade brand is built on a reflexive, emotional-level trust and utility that is arguably far more durable than a B2B procurement decision.

6. Cornered Resource

• In SaaS this is rare. Some companies hold valuable IP, proprietary algorithms, or uniquely skilled teams, but these advantages are usually temporary. Competitors can often build similar features or recruit comparable talent, which makes this power less durable.

  
  

• In Marketplaces this can be built and scaled. The most powerful cornered resource is proprietary transaction data. A marketplace doesn't just list items; it knows what sold, at what price, to whom, and what the conversion funnel looked like. This dataset is unique and inimitable. Other forms include exclusive supply contracts or regulatory licenses (e.g., in fintech or gaming).

  
  

7. Process Power

• In SaaS process power is often the product itself. Software like ServiceNow or HubSpot codify proven workflows, turning customer experience into embedded best practice. Each iteration refines how work gets done as feedback from thousands of users improves the product in real time. The loop is fast and scalable, but also visible, so competitors can eventually copy it.

  
  

• In Marketplaces process power builds through experience. It comes from learning how to onboard supply, manage liquidity, prevent fraud, and keep transactions smooth. Deliveroo, for example, learned how to batch orders, predict prep times, and route drivers across thousands of restaurants. These lessons are learned over time, not designed in a sprint, and they shape how the platform runs. SaaS scales learning through code. Marketplaces scale it through experience, and experience is harder to copy.

CONCLUSION

In an era of disruption, VCs and founders are hunting for durable moats. The debate today isn’t “SaaS vs. Marketplaces,” but which model builds deeper and more durable defensibility.

While SaaS has created incredible value, its moats (workflow lock-in, intra-company network effects etc.) are, in many cases, more ephemeral than we'd like to believe. A marketplace, when built correctly, creates a self-reinforcing system of liquidity, trust, and reputation that compounds with scale. Their powers do not operate in isolation; they strengthen one another until participation itself becomes the moat.

The next blog will explore how AI may reshape these dynamics and whether intelligence and automation will undermine marketplaces or make them even harder to disrupt.