$3.23 trillion in goods were sold in 2021 on online marketplaces. This is where Amazon is a leader.
Typically, online marketplaces operate on commission, subscription, or listing fees. However, there are many more revenue models. Each has its own benefits and difficulties.
There are 6 different marketplace business models that entrepreneurs can use today:
1. Commission Revenue Model
A commission model charges a fee for every transaction. This is the most popular online marketplace business model. Typically, the marketplace charges a percentage of the customer’s payment to the supplier.
Amazon, eBay, Etsy, or Airbnb are examples. They all charge a commission per transaction and have sellers offering a variety of products.
2. Subscription Model
A subscription model is a revenue model where users pay a regular fee to access a platform.
Using an online marketplace with a subscription model allows suppliers to find new clients, or access a database of potential clients.
Subscription models are good for online marketplaces with limited resources, or whose business logic excludes transactions between users.
3. Listing fee Model
In the listing fee model, online marketplaces charge sellers for posting ads on the platform. Listing marketplaces are popular because they drive a lot of traffic to the site, allowing providers to gain more exposure on their listings.
To justify their listing fees, these sites must drive high volumes of traffic. Sites such as Trulia.com and Realtor.com use this business model.
4. Freemium Model
A freemium marketplace allows both buyers and sellers to use it for free. The business is monetized by offering additional features, premium subscriptions, or cross-selling other products and services.
The idea behind this model is that your free platform gets users hooked, so they can’t resist paying for your premium features.
Unsplash is a great example of a stock photo provider.
5. Featured listings and ads Model
A featured listings and ads model is an online marketplace revenue model in which sellers purchase advertising privileges to enhance their visibility.
The seller or service provider pays to have their listing displayed higher than others or to be at the top of their category.
eBay’s classifieds division uses this method. It’s free to list and sell on their platform, but users pay a flat fee if they want their offering to appear first.
6. Lead Fee Model
A lead fee is somewhere between a listing fee and a commission model.
Typically, lead fee models involve customers posting requests on a site and providers bidding for these requests. You only pay lead fees when you are put in contact with a potential customer: you don’t pay a listing fee.
Thumbtack, a B2C marketplace for local professionals, like plumbers and guitar teachers, is one recent example.
