Red Oceans: Exploring the Unbundling OpenSea Thesis

Key Insights

• Though OpenSea has dominated the last two years, specialized marketplaces could unbundle the platform’s services over the coming years.
• Established protocols and projects are actually disincentivized to use OpenSea, as they lose revenue in the form of trading fees - BAYC’s ecosystem alone has given OpenSea over $125 million.
• STEPN provides an example of the positive effects of unbundling for breakaway projects – after leaving Orca’s exchange infrastructure to integrate their own native DEX, STEPN became the #1 DEX on Solana by user count.
• To counter growing specialization in NFT markets, OpenSea can follow the Zuckerbergian strategy of acquiring escape-velocity first movers in new verticals, à la Instagram and WhatsApp.

Earlier this year, Tasha Kim wrote a thesis claiming that OpenSea would follow eBay’s unbundling process. From 1995 to 2013, eBay became a dominant horizontally integrated marketplace, growing to over $80 billion in gross merchandise value exchanged on the platform.

But by 2022, Ebay lost its market share to dozens of verticalized marketplaces. Kim drew attention to five marketplaces: Etsy, Airbnb, 1stdibs, Chegg, and Zillow. At the time of writing, these five were worth ~$130 billion — over 4 times greater than eBay’s ~$30 billion valuation at the same time.