Marketplace Business Model: 7 Ways to Profit from your Marketplace
There are various types of business models available for implementation and depending on the products and services offered, you can either pick one, combine a couple or offer a mixed set to bring the best possible experience to your customers. In a variety of available types, there 7 basic marketplace business models that can be used to monetize your project.
Image source: Synergy Way
Subscription Business Model
Subscription Business Model is one of the most common models where services/products provided are being offered for monthly/yearly fees. Subscription business models might differ based on services offered or access provided. Users are allowed to choose subscription offers they prefer and continue/cancel their subscriptions based on their needs. Netflix, Google Play Music, PlayStation+ are well-known platforms that are based on the subscription business model.
Commission Based Business Model
Commission Based Business Model is based on charging fees for every business transaction made on a platform. Transaction fee depends on different platforms and different requirements but usually varies from 5% to 20%. The commission can be paid by:
- vendor and buyer
The greatest advantage of the commission-based business model is its proportional scaling based on product prices.
Selling Fees Marketplace Business Model
Unlike the commission-based business model, where either vendor or buyer is being charger extra price above the item listed, in Selling Fees Business Model a share received is already listed in the price. However, to compensate for the item, in most cases, sellers already include selling fees in the price offered. One of the greatest examples would be the eBay business model.
Listing Fees Marketplace Business Model
Listing Fees Business Model is based on a simple principle of charging a certain fee from a listed item. The listing marketplace business model requires upfront payment for listing an item on a platform and usually is not dependent on the price and offers a fixed payment. This can be:
- one time fee
- time-based fee
- subscription-based fee
Listing Fees marketplace business model can also offer premium listings that make the products listed appear more often, be more visible and graphically attractive to the customer. Usually, the Etsy business model is heavily based on listing fee options.
Advertising Business Model
Advertising business model is a great option when you decide to use your platform as an advertising platform for promoting goods. It allows third-party advertisers to list and offer their services or goods on your site. In other words – you are going to receive income for every advertisement posted on your site. These might be:
- Text advertisements
- Graphic Banners
- Mixed advertising
The biggest downside of the advertising business model lies in untrustful clients who can abuse your marketplace and post inappropriate third-party sellers promotions. This can directly influence and reduce the number of potential clients.
Lead Generation Business Model
Lead Generation Business Model is the best option for marketplace business models that offer non-standard services and goods. The best examples would be dating sites, cleaning services, teaching sessions and more. The lead generation business model is based on transactions taking place outside the platform where the buyer has to invest in getting access to the item or information about the item. In other words – your site is being used to connect potential buyers and performers. Upwork freelancing platform would be a great example where this marketplace business model is being used where in order to apply for a project one has to pay a certain fee.
Transaction Fee Revenue Model
Transaction Fee Revenue Model is directly dependent on the popularity of your marketplace since the income is based on the number of successful transactions. Unlike selling fee marketplace business model, you receive profit from:
- membership payments
- premium extra features
While the transaction fee revenue model is not that easy to implement, it surely can be considered in combination with other types of business models.
A small tip for big results…
Your income directly depends on choosing a proper marketplace business model thus your decision should be based on the product and services you plan to offer.
Before making your final decision, make sure you:
- research the market and study your competitors
- learn your target audience
- pick the marketplace business model that suits your goals
It is always a good strategy to start with the simplest monetization method and after scaling business try out and implement new business model strategies.
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