What exactly is the measurement of a marketplace success? A number of users or amount of invested money?
Nope, it is your marketplace revenue. In order to make the right choice, you should know about all the pros and challenges that each marketplace business models have and which marketplace revenue model each marketplace giant uses, and why.
In a nutshell, there are 7 core online marketplace revenue models. Every model has its own pros and challenges:
1. Commission Revenue Model
The commission model is a revenue model where a user is charged a fee for each transaction. It is by far the most popular online marketplace business model. When the customer pays the supplier, the marketplace charges a percentage or a fixed fee for its services.
2. Subscription Revenue Model
The subscription model is a marketplace revenue model where a user is charged a regular fee for access to the platform.
The value proposition of the online marketplaces that use a subscription model is helping the suppliers to find new clients, or getting access to the database of potential clients or partners.
3. Listing Fee Revenue Model
The listing fee model is an online marketplace revenue model when a marketplace charges clients for posting ads on the platform.
While the commission-based online marketplaces charge a fee only when the item is sold, they may miss the revenue from the less popular merchandise. The listing fee model allows tackling this problem and getting profit from each and every ad on the platform.
4. Freemium Revenue Model
Freemium is a revenue model where a marketplace has both free and premium features. This model is a bit tricky to work with since your marketplace needs to offer very alluring premium features for users.
5. Featured Listings and Ads
The featured listings and ads model is an online marketplace revenue model where sellers buy advertising privileges to enhance visibility on the platform.
Sellers or service providers pay to have a featured listing higher than others or be at the top of a certain category provided that all other listings are free to post.
6. Lead Fee Revenue Model
The lead fee model is an online marketplace revenue model where a user posts a request and suppliers pay the marketplace fee in order to bid for the customer.
7. Mixed Revenue Model
When selecting an online marketplace revenue model for your platform, it is not necessary to choose only one of them.
The major players in the online marketplace business successfully combine several models and have several revenue sources.
The most popular monetization model for an online marketplace is a commission model. With this model, a user is charged for every transaction.
Besides the main monetization models like commission, subscription, and freemium, there are secondary models that can provide an additional revenue stream.
However, limiting yourself to a particular marketplace business model is no longer necessary. The major market companies successfully combine two or even more strategies like Amazon or Etsy.
