Top 6 marketplace monetization models to consider
1. Registration fees
A registration fee, also known as a sign-up fee, is a popular marketplace business model that requires a flat payment from vendors for joining the platform. This way, sellers have to pay only once and then operate freely on a marketplace.
Benefits of using sign-up fees:
- It is much easier to adopt this strategy in comparison with other practices. For example, when charging a commission, a percentage of every transaction amount has to be automatically calculated and transferred to marketplace owners while the remaining sum has to be sent to merchants.
- By employing this strategy, the revenue will not depend on the volume of sales.
Drawbacks of this marketplace monetization model:
- It can be quite challenging to assure sellers to make a payment before registration.
- If you manage to attract the majority of vendors operating on the market, you will have to incorporate other revenue models to have a steady source of income.
When bringing the registration fees model into action, it is crucial to:
- Conduct competitor analysis. Before launching a software solution, an organization should research conditions suggested by similar marketplaces to come up with more favorable terms. With lower fees, it will be much easier to draw the attention of merchants, which is vital for new market players.
- Create a catching selling proposition. To engage vendors and earn a profit, it is important to convince them to register by describing the advantages.
- Offer a bonus for signing up. This is a great way to draw the attention of service providers, especially when you have just released a marketplace.
It is worth remarking that typically, digital marketplace platforms do not require customers to pay sign-up fees, as they are not likely to pay before ordering products or services when there are so many other, free solutions.
Example with ClickBank
Established in 1998, ClickBank is a worldwide online e-commerce and affiliate marketplace delivering either physical or digital products. At the moment, the system is used by over six million customers across the globe.
To start using the platform, service providers have to pay an activation fee of $49.95. In addition, ClickBank also withdraws a $2.50 commission for payment processing.
2. Transaction commission
The commission is among the most widespread marketplace monetization models used by globally recognized companies, such as Amazon and Uber Eats. With this strategy, vendors and consumers can register on a marketplace application for free.
In this case, the revenue depends on the number of transactions carried out through the system, as well as their amount if a fee is not fixed.
Benefits of charging commission:
- As marketplace operators receive a percentage of each transaction, it is easier for them to maintain the level of income.
- Vendors have the possibility to try out system functionality prior to making any payments. As a consequence, the credibility of an online platform increases.
Drawbacks of this marketplace monetization model:
- It is more difficult to implement this strategy in comparison with some other options such as flat sign-up payments.
- When you have just launched a marketplace app, it may take a while to attract sellers and buyers.
- As long as a small fee is withdrawn from each successful payment, this marketplace monetization model generally showcases the best results in the long run.
To make this business model work, companies should:
- Calculate what fee has to be withdrawn for generating sufficient profit. Before setting up the amount of a transaction fee, it is also advisable to analyze the terms provided by competitors.
- Help suppliers maximize sales by delivering components necessary to automate business operations and ensure a seamless experience. For instance, a company can integrate a digital marketplace platform with systems for order and shipping management.
With functionality like one-click ordering, voice payments, and product comparison, vendors will be able to significantly raise the conversion rate.
Example with Airbnb
Airbnb is a world-famous online lodging marketplace operating according to a peer-to-peer model. To improve the audience's satisfaction, Airbnb comes up with more beneficial conditions in contrast with many other marketplaces.
The platform demands a relatively small commission for carrying out each guest-host transaction, splitting it between two parties. While customers are charged a fee ranging between 5%–15%, vendors have to pay a fee of 3%–5%.
As a comparison, Booking.com requires an average commission of 15%, which is paid by accommodation owners only. This fee can vary depending on property type and location. It is worth noting that a transaction fee in on-demand service marketplaces like Uber Eats and Postmates hovers around 30%.
With a subscription monetization model, vendors have to make regular payments in order to use a marketplace platform or access some bonuses. To make this strategy work, it is crucial to keep merchants engaged.
The key benefits of a paid subscription:
- A company receives a steady source of income while sellers do not have to make a large payment before they run a business on the platform.
- This practice is perfectly suited for the long run.
Drawbacks of this marketplace monetization model:
- A high churn rate may become the biggest challenge.
- Subscription may not fit some sectors due to their specifics. For example, operating in the foodservice industry, Uber Eats does not apply a paid subscription to avoid the risk of encountering restaurant churn.
When using this strategy, it is important to:
- Provide a free trial. By allowing businesses to try out marketplace functionality, you will manage to increase the number of registrations and subscriptions.
- Create value that outperforms the price of a subscription. Communicate with vendors to find out their suggestions and proposals while introducing changes accordingly.
- Describe the main arguments of joining an online marketplace platform and demonstrate them to users.
- Offer different subscription plans and enable users to switch between them at any moment. Additionally, you can provide discounts for advanced plans.
- Continuously track metrics such as lifetime value and satisfaction rate to prevent churn.
Example with Coursera
Founded in 2012, Coursera is a popular e-learning marketplace that has 77 million users, as of 2020. Allowing trainees to use the platform free of charge, the company offers a subscription program called Coursera Plus.
To get unlimited access to 90% of the educational content, customers have to purchase a $59 monthly or $399 annual subscription. Hence, students have the possibility to pass multiple courses and get certificates, saving a lot of money.
If you aim to create a marketplace like Coursera, read our guide on the topic describing project cost and timeline, as well as functionality that you should implement.
4. Listing fees
By applying listing, or insertion, fee, marketplace platform owners charge a certain amount from merchants for posting their goods. This amount is based on the product value: the higher its cost is, the higher sum is demanded.
This strategy is commonly used in marketplaces delivering expensive items, such as cars, electronics, property. Examples of popular marketplaces applying insertion fees are eBay, Amazon, Etsy (e-commerce); Realtor.com (real estate).
The main benefits of this marketplace revenue model:
- It is easier to attract vendors when charging a small fee for posting their products.
- If you have an online listing marketplace that doesn’t process transactions, implementing this monetization strategy is a good way to earn income.
Drawbacks of employing listing fees:
- When you have just launched a marketplace, generating revenue may be a tricky task, as you do not have a critical mass of customers required to achieve high listing visibility.
- This marketplace monetization model doesn’t fit all industries. For instance, online healthcare platforms for virtual consultations generally do not apply it.
- To prevent seller churn and make a profit, it is essential to drive a high traffic volume to a digital marketplace platform. By showcasing positive statistics on the number of users and their engagement rate to merchants, a company will manage to convince them to pay insertion fees.
When putting into life this marketplace business model, an organization should:
- Offer free listings. Thanks to this strategy, you will be able to increase the loyalty of sellers and encourage them to list their goods on the platform.
- In case a marketplace application delivers high-cost items such as jewelry or property, it is advisable to impose the maximum fees possible. However, the amount of charged payment should be lower in comparison with competitors.
Example with Etsy
Founded in 2005, Etsy is a globally recognized e-commerce marketplace that connects consumers with vendors selling craft, handmade, and vintage items in various categories. Before building a website, the founders conducted competitor research and found that the niche of vertical, narrow-focused marketplaces was rather vacant.
What’s more, they revealed that it was costly for merchants to operate on e-commerce platforms like eBay. At that point in time, eBay charged 50 cents for listing a $25 item and a commission of between 8–15 cents. Additionally, creators had to pay $20 per month to maintain the eBay store.
Aiming to engage artists and help them make a profit, Etsy decided to withdraw 10 cents for four-month listings and a commission of 3.5% for each sale. Coming up with a more beneficial marketplace monetization model, the company was able to attract 450,000 merchants by 2007. Soon, Etsy managed to raise $3.3 million in funding.
A freemium monetization model means that a marketplace allows vendors and customers to interact with the application for free while requiring them to pay for additional features. The key idea behind this strategy is to attract and engage the audience, encouraging them to subscribe to premium functionality.
The principal advantages of applying a freemium model:
- Since users can join and employ the system free of charge, it is much easier to quickly gain a critical mass of users.
- Providing free access to an online marketplace platform, an organization receives loyal sellers and consumers.
Drawbacks of using this marketplace monetization strategy:
- The main task is to find the balance between free and paid functionality to generate high profit while preventing user churn.
- It is challenging to predict the level of income.
- Convincing the majority of users to pay for premium features can be rather difficult.
How to make this marketplace monetization model work:
- To find the right balance, you should test various pricing plans.
- It is reasonable to carry out polls and surveys to identify user expectations about features they would like to have. Then, you should improve the app according to their feedback.
- Analyze the audience’s needs prior to online marketplace development to get an understanding of industry specifics. This way, you will discover what functionality they will be willing to pay for.
Examples with Unsplash and Pixabay
Stock photo marketplaces like Unsplash and Pixabay provide a range of high-resolution images for free while enabling customers to donate money. Furthermore, Unsplash requires a monthly subscription fee to access stock photos for either commercial or non-commercial use.
Advertising is a great marketplace business model for popular marketplaces that helps merchants maximize sales. There are a few ad types, including sponsored banners and third-party product listings, text advertising (i.e., mentions in news and blog articles), and a combination of several options. Numerous marketplaces across different sectors use this approach, involving Uber Eats, Zillow, and Craigslist.
Benefits of employing paid promotion:
- Online marketplace operators receive a steady source of income.
- As the system allows for using functionality free of charge, the loyalty of sellers increases.
- If implemented properly, this strategy can assist a company in adding value to not only vendors but also consumers. For example, an organization can employ data analytics to monitor customer behavior and display ads based on their interests.
Drawbacks of this marketplace monetization strategy:
- This practice will not bring sufficient profit if the platform has a low traffic volume. However, attracting a critical mass of users may consume time and costs.
- It may be impossible to generate revenue when bidding on this strategy only, especially when you have just released a marketplace application.
To make this monetization model work, it is important to:
- Conduct research to discover which type of ads will perfectly suit a marketplace platform. For instance, consumers may find banners annoying.
- Ensure strong competition between service providers to motivate them to use advertising, as well as extend product offering for customers.
- Apply a combination of models to earn sufficient profit while growing a user base.
Example with Uber Eats
Launched by Uber in 2014, Uber Eats is an online food delivery marketplace that currently operates in 32 countries. With promotions, restaurants are charged for having their company name displayed at the top of search results.
Employing the Uber Eats dashboard, businesses can launch a sponsored campaign, indicating the target audience, timeline, and budget. In this case, they have to pay a certain amount each time a user clicks on an advertisement.
With this marketplace monetization model, businesses manage to catch the attention of customers and increase the conversion rate. Combining this strategy with transaction fees, Uber Eats maximizes its revenue.
A monetization model is a method by which you earn money from a product, service, creation, intellectual property, or even your personal brand. For example, if you were creating an app, you could choose to add in-app purchases, charge for downloads, include advertisements, or all of the above.What is an example of a marketplace model? ›
Marketplace Model of Ecommerce Examples:
Examples of brands following the marketplace model are Amazon FBM, Shopclues, eBay, Etsy, etc.
The marketplace business model is a virtual space where buyers and sellers can connect in order to buy and sell goods and services. The marketplace is the intermediary which adds value by facilitating this connection using a proprietary platform.How do I monetize my marketplace app? ›
The most common way to monetize mobile apps is by running in-app ads. In fact, 50% of mobile gamers prefer free ad based games. This method offers a valuable source of revenue for apps that want to remain free in the app store. Providing content and ad formats relevant to your users can create a great user experience.Which monetization is best? ›
|TikTok||Level: Beginner Best for: Short, trendy content clips.|
|Vimeo OTT||Level: Intermediate Best for: All video creators.|
|Brightcove||Level: Beginner Best for: Integrating videos to a WordPress site.|
|VlogBox||Level: Beginner Best for: Connected TV content.|
We examine five core customer and marketplace concepts: (1) needs, wants, and demands; (2) market offerings (products, services, and experiences); (3) value and satisfaction; (4) exchanges and relationships; and (5) markets.What is an online marketplace list some examples? ›
Online marketplaces are information technology companies that act as intermediaries by connecting buyers and sellers. Examples of prevalent online marketplaces for retailing consumer goods and services are Amazon, Taobao and eBay.Is Amazon a marketplace model? ›
Amazon Marketplace is an e-commerce platform owned and operated by Amazon that enables third-party sellers to sell new or used products directly to consumers on a fixed-price online marketplace alongside Amazon's regular offerings.What are the 3 main types of revenue models? ›
Common revenue models include subscription, licensing and markup. The revenue model helps businesses determine their revenue generation strategies such as: which revenue source to prioritize, understanding target customers, and how to price their products.What is your revenue model answer? ›
A revenue model is a framework for generating financial income. It identifies which revenue source to pursue, what value to offer, how to price the value, and who pays for the value. It is a key component of a company's business model.
Most percentages reflect 13.25% across most categories. The other two marketplaces vary their transaction fees by category, so it's important to look up the fees for your products. The table below includes the pricing for some popular product categories.What is monetization strategy? ›
A monetization strategy is a plan that aims to generate revenue via your platform, audience, content, or other sources. There are a lot of different monetization strategies. Some of the most common include selling access to the platform, selling ad space, in-app purchases, and more.How do online marketplaces make money? ›
Featured Listing & Ads
Featured listings and ads are both popular revenue streams for classified ad sites. Any Combination of These Models: Oftentimes, these business models are combined to create more favorable conditions for merchants to sell their products and for online marketplaces to earn consistent revenue.
- Price Items Well. I stick to at least 50% off the retail price or less depending on the condition and perceived desirability of the item. ...
- Take Clear Photos. ...
- Clean & Fix Items. ...
- Bundle Like Items. ...
- Use Keywords. ...
- Crosspost Your Items. ...
- Respond Promptly. ...
- Suggest Add On Items.
- Affiliate marketing.
- Facebook Marketplace.
- Facebook Live.
- Instant Articles.
- Sponsored content.
- Subscription groups.
- Free Facebook groups.
- Making money selling stuff.
Have a Creator or Business account. Have at least 10,000 followers. Adhere to Instagram's Partner Monetization policies and content guidelines.What are the 3 main types of online marketplaces? ›
- B2B (business-to-business) — Business marketplaces.
- B2C (business-to-customer) — the businesses sells to its clients.
- C2C (customer-to-customer) — only private individuals offer and make orders, not entrepreneurs, equal communication.
Markets (electronic or otherwise) have three main functions, summarized in Table 1: (a) matching buyers and sellers; (b) facilitating the exchange of information, goods, services and payments associated with market transactions; and (c) providing an institutional infrastructure, such as a legal and regulatory framework ...What are the three types of online marketplace? ›
- Business-to-business (B2B)
- Business-to-consumer (B2C)
- Consumer-to-consumer (C2C), sometimes called peer-to-peer (P2P)
In a regular online store, you're the one managing shipping rules and delivering orders to your customers. When you're running a marketplace platform, it's up to your vendors to receive, process and dispatch the orders.What is the difference between marketplace and website? ›
The website will include only your products and they are placed into categories. There are two parties involved when a sale is made on an eCommerce website, the buyer and the seller. Marketplace is an online shopping platform where products are sold by multiple sellers.What is difference between Amazon and Amazon marketplace? ›
Difference between Amazon.com and Amazon Marketplace
Whereas Amazon.com is a giant online retailer corporation, Amazon marketplace is a network of third-party online sellers who use the domain to sell their own products.
eCommerce and marketplace are two different types of platforms. An eCommerce store is an independent website built with the help of eCommerce solutions such as Shopify, WooCommerce, or Magento. On the other hand, a marketplace is a platform where customers find sellers, connecting, and purchase goods.What are the advantages of the marketplace model? ›
Wider Reach – Marketplaces have an existing well-developed customer base so individual brands/ sellers can capitalize on it thus saving efforts and costs in marketing for themselves. They also have a well-established network of Third-party logistics providers so brands/ sellers can ensure efficiency in the last mile.Which business model is most profitable? ›
The ad-supported business model is among the most successful of the digital era. It is behind the rise of companies like Google and Facebook, which match users to products and services using AI and analytics. This has become possible due to the sheer amount of user data that can be captured from online users.What are the 4 types of revenue income? ›
- Rent revenue.
- Dividend revenue.
- Interest revenue.
- Contra revenue (sales return and sales discount)
Commission-based revenue models
A commission-based revenue model is one of the most common ways businesses make money today. A commission is a sum of money a retailer adds to the total cost of a product or service.
E-commerce revenue models are used to generate income online and include product and information sales, affiliate marketing, online advertising, subscription services, and transaction fees.What is a revenue model template? ›
The revenue model allows you to add sales projections for customers that make one time purchases as well as customers that subscribe to a monthly or regular subscription box service. Key features include: Works in Excel and Google Sheets.
The industry average for sales commission typically falls between 20% and 30% of gross margins. At the low end, sales professionals may earn 5% of a sale, while straight commission structures allow a 100% commission.Is 20% commission a lot? ›
However, the typical commission rate for sales starts at about 5%, which usually applies to sales teams that have a generous base pay. The average in sales, though, is usually between 20-30%. What is a good commission rate for sales? Some companies offer as much as 40-50% commission.Is 2% a good commission? ›
If you're selling a luxury home, a home in an area where the average market value is high, or a home with lots of upgrades, the agent stands to make a good commission even at 2%.What is the formula for monetization rate? ›
eCPM formula for ad monetization: eCPM = (total earnings/total impressions) x 1,000. To calculate eCPM, divide your total advertising earnings by the total number of impressions your app served. Then multiply by 1,000.What are the most common app monetization strategies? ›
- In-App Advertising. ...
- Free and Paid App Versions. ...
- Free App with in-app Purchases. ...
- Free App with Subscription (Freemium) ...
- Paid App. ...
- Partnership Model. ...
- Affiliate Marketing. ...
- Email Lists for App User Retention.
- Reach Vendors on the existing platforms. ...
- Do Marketing of your e-commerce marketplace website smartly. ...
- Find vendors for your ecommerce marketplace website and connect with them directly. ...
- Use the Email marketing technique.
- Build a solid foundation for growth.
- Introduce marketplace curation.
- Make the most out of your marketing toolkit.
- Onboard and protect your supply.
- Invest your resources in creating a powerful brand.
- Understand what works great in your marketplace.
- Find a great marketplace idea and validate it.
- Choose your marketplace business model and pricing level.
- Build your Minimum Viable Platform (your marketplace MVP).
- Build your initial supply.
- Launch your marketplace to the first customers.
- Track your key metrics and grow your business.
According to Statista, online apparel retail revenue will approach 300,000 million dollars in the US in 2023. Regarding selling fashion items, Facebook Marketplace sellers commonly stick to well-known brands and sell them at a lower price.
Don't transfer money directly into a seller's bank account. Instead, offer to use a secure person-to-person payment site, such as PayPal or sending and receiving money in Messenger.
What items sell best on Facebook marketplace. There are people who actually earn a living reselling online. Basically, nearly anything you could sell at a yard sale, you can sell and ship from Facebook.What are the three data monetization models? ›
With these three data monetization business models – Embedded Analytics, Data Marketplace, and Data-Driven Product Enhancement – and others, software companies have various options for generating additional revenue streams while adding value to their core offerings.What are the three models of monetization strategies in digital media? ›
Affiliate marketing, product placement, and pay-per-click (PPC) ads are the most common ways to get paid by third parties.What are the best examples of data monetization? ›
A simple example of direct data monetization is contact lists of potential business prospects that influence buyers' businesses or trades. Indirect or internal data monetization involves making measurable business performance improvements and informed decisions using data.What are the 3 ways to monetize data? ›
Companies can take three approaches to monetizing their data: (1) improving internal business processes and decisions, (2) wrapping information around core products and services, and (3) selling information offerings to new and existing markets.What are monetization strategies? ›
A monetization strategy is a plan that aims to generate revenue via your platform, audience, content, or other sources. There are a lot of different monetization strategies. Some of the most common include selling access to the platform, selling ad space, in-app purchases, and more.Who are the key players in data monetization? ›
The data monetization market is dominated by companies such as Microsoft Corporation (US), Oracle(US), Salesforce(US), SAS (US), TIBCO (US), IBM (US), Qlik (US), SAP (Germany), Looker (US), ThoughtSpot (US), Sisense (US), Domo (US), Accenture (Ireland), Virtusa (US), Infosys (India), 1010Data(US) and more.What are the four digital marketing models? ›
Four Digital Marketing Models
Strategy& has identified four equally successful digital marketing models: Digital Branders, Customer Experience Designers, Demand Generators, and Product Innovators.
In a product-led company, the typical customer journey follows four stages: Acquisition → Engagement → Monetization → Expansion.How many types of data monetization are there? ›
Based on how the data is being used there are two main types of data monetization. The first and most direct method is data sharing with external and third-party sources i.e. direct sale of data or information bartering. The data can be in raw format or data that is already analyzed.
The primary benefit of monetizing a product is the potential for generating income. Monetizing a product typically involves charging customers money for its use or access, which can provide a steady stream of revenue.What are 5 ways this app can monetize? ›
- The free and paid app versions model. ...
- The free app with in-app purchases model. ...
- The free app with subscription model. ...
- The paid app model. ...
- The partnership model.
There are two ways to monetize your data externally—either by offering data as service or product, or by offering insights as a service or product. Data as a service is access to raw and governed data sets—information that consumers can use however they want.What are the three sources big data for marketers? ›
Three types of big data for marketers
Marketers are interested in three types of big data: customer, financial, and operational. Each type of data is typically obtained from different sources and stored in different locations. Customer data helps marketers understand their target audience.