How Startup Wikileaf Is Legitimizing the Marijuana Gold Rush
In its current state, the world of marijuana is fairly turbulent. There are two states with legal sales and consumption laws, and a slew of others with medical markets experiencing varying levels of success. Both Colorado and Washington have licensed, operating retail stores where anyone of legal age can now purchase cannabis products, and the rest of the country — and many around the world, for that matter — are watching carefully to see what happens. Even for those who have no interest in marijuana or its byproducts, it’s still an exciting time to watch an entire new industry emerge as a result of deregulation, even if the laws are still a bit tricky and ambiguous.
One reason that the average Joe might want to take note of the recent happenings within the marijuana industry? It’s because we will all get to see the free market work its magic. This may be the first time in recent memory that something like this has happened, and the potential, specifically with cannabis, is huge.
Entrepreneurs are gearing up for a proverbial “gold rush” as prohibition sweeps into other states, from growers to sellers and everyone in between. There are also many new ventures in the virtual space tailored to the marijuana industry in general, taking ideas from other industries and applying them or coming up with new concepts.
One of those is Seattle-based Wikileaf, which has been compared to sites such as Yelp and Priceline. The truth is, Wikileaf isn’t either of those sites, although the comparison isn’t completely off-base. So what does it actually do?
“It’s a price comparison website for marijuana dispensaries and delivery services,” said Dan Nelson, the young company’s founder. And Nelson’s background isn’t exactly what you might expect of a marijuana entrepreneur, either.
“I’ve been running a banking blog since 2008 that specializes in CDs and savings accounts, anything that’s FDIC-insured, and it runs an interest-rate comparison, basically, for all the banks in an area,” he said. “So that’s where I got the idea to apply the same price-comparison dynamics to the legal and medical marijuana marketplace.”
While the price comparison dynamic of the Wikileaf model is at the heart of its functionality, the site uses what Nelson calls a “reverse-auction” to find consumers the best price on product.
This is where all those comparisons to Priceline become relevant, because Wikileaf’s reverse-auction essentially operates the same way as bidding on a hotel room.
“We figured this was the most price-centric way to make this work, and we’re also kind of trying to get dispensaries to compete with each other a little bit on price so we can bring it all down for the consumer,” Nelson said.
It’s a great idea, and it’s being applied in a different way than anyone probably could have ever imagined. Think about people 10 years ago trying to hold a bidding war with street dealers — it’s hard to think it would’ve gone over well.
And for the folks at Priceline who pioneered the reverse-auction system, do you think they ever would’ve imagined that their system would be applied to legal cannabis transactions? Probably not.
But how does Wikileaf fit into the rest of the picture when it comes to marijuana-centered online ventures? Sites like Weedmaps and Leafly have been making a lot of noise and have picked up followings, but with the entire industry in its infancy, do these sites actually compete against each other for traffic, or are they all still bound together in a fight for legitimacy?
It’s actually a little bit of both. Nelson says that Wikileaf is actually taking things a step further than some of the older, more established sites.
“Essentially, we’re all competing. But all have different takes on the market and the industry,” he said. “But we’ve taken it one step further where not only do we have menus and stuff like that on our site, but we also have the price comparison model, too.”
One interesting idea to explore is whether Wikileaf, by actually forcing dispensaries and delivery services to compete with each other, actually will play a large role in shaping the industry as a whole. Since the legal market is only available to a small subset of the general public, and the medical market is a bit like the wild West in terms of regulation in many states, can a site like Wikileaf — by entering the fray so early in the marijuana market’s lifespan — actually make the market better when it by-and-large still doesn’t exist yet?
That will be an interesting caveat to keep an eye on going forward. Just imagine if websites like Yelp or Priceline had existed when the prohibition of alcohol had ended, and the role that a wildcard like those sites could have played in shaping the liquor and bar industry as a whole. Things would certainly be different, but it’s hard to pinpoint how, exactly.
Of course, we still don’t know what a nationwide end to prohibition would bring about, although that outcome is looking more and more likely as time marches on.
Right now, the legal marijuana retail market is still not even phased into Wikileaf’s site, as it currently only serves the medical market, which is much more extensive. And until the markets in both Colorado and Washington can actually reach a level of equilibrium, or when supply and demand can actually meet, Wikileaf’s price-comparison model is best served only in the medical marijuana industry.
Another question that is uncertain is what will happen to the medical industry in other states once prohibition ends. Again, that will be answered with time.
But for now, helping consumers find the right product — and at the right price — is where Nelson is focusing Wikileaf’s efforts. By simply doing that, Wikileaf may be able to shape the industry on a macro scale for the better, before the market even hits most areas.