Best Business Models For The Marketplace - A Complete Guide in 2022

Marketplaces are indeed the way of doing business in today's highly competitive market. However, how do entrepreneurs earn profits? Business owners want to know how Amazon, eBay, Airbnb, and Etsy generate huge revenue. 

If you have a fruitful marketplace idea, it is time to understand the best business model for it. We have analyzed some of the best marketplace business models to help you generate huge income. 

What is a marketplace?

Developing your own marketplace isn't an easy job. It requires years of expertise and experience. An online marketplace brings sellers and buyers to a single platform. Moreover, the marketplace owners don't need their inventories. Instead, a marketplace owner assists people to find their desired products and complete a transaction.

There are several marketplaces such as Business-To-Consumer (B2C), Business-To-Business (B2B), Peer to Peer, and others. In Business-to-consumer marketplaces, consumers find different businesses or sellers; in peer-to-peer marketplaces, the transactions generally occur between people, for example, Airbnb. Businesses find each other in business-to-business marketplaces for different purposes such as UpWork, Freelancer, etc.

Know the Best Business Models for Marketplaces

How do you fix which business model is best suitable for you? Your selected business model must be scalable, adaptable, which at the same time must meet customers' demand. Always choose business model for the marketplace from your customers' perspective. 

There are six different marketplace models that many businesses use, listed below:

• Commission
• Membership/subscription fee
• Freemium
• Lead fee
• Listing fee
• Featured listings and ads

1. Commission Business Model

The commission model (or revenue model) is where a user is charged some amount for each transaction. It is one of the widely used marketplace business models. When a user makes a transaction, the marketplace charges a fixed fee or a percentage for its services. It may charge seller and buyer, which means taking commission or fixed fee from both parties. 

It is one of the widely used business models since the fee charged here is justified. Sellers and buyers may operate for pay and free only when they get some value from here. On the other hand, the marketplace platform generates revenue from each conversion or transaction.

Some of the best examples of this marketplace business model are Airbnb, Etsy, eBay, Fiverr, TaskRabbit, and Uber.

2. Subscription Business Model

This model tends to charge money for every subscription or membership fee from the platform users. The best advantage for users here is that they can cooperate with the service provider as per their needs. Several businesses use this model to generate income. 

Membership or subscription fee methods are widely used by many online resources dedicated to different services such as dating and apartment exchange (Match.com, Home Exchange, etc.).

These websites also describe the subscription cost for every service section to ensure the fee they charge is average and decent to give a pleasant user experience. We know that marketplaces offer different options for managing subscription fees, relying on the features and services delivered.

3. Freemium Business model

If your marketplace is a platform where people share their services or products for free, you will need to be more creative and innovative to know how to monetize your platform. You can also offer premium services as it is one of the solutions today. For example, a premium account offers several advantages to the users, such as enhanced customers support, access to more features, and other perks.

Your premium services should be intriguing and sufficient enough for your users to be scalable, flexible, and sustainable. Generally, providing premium services must be suitable for your staff as well. That's why you are required to blend a Freemium model with other pricing models (like featured listings).

Peer by is one of the best examples of the Freemium business model.

4. Lead Fee Business Model

This marketplace is the best choice when we talk about rendering services that the business owners can't deeply analyze; freelance projects, repair jobs, etc. It is one of the best marketplace business models used globally to generate revenue by charging some amount from suppliers to contact customers. 

Different service finder websites such as Pro Referral, Porch, and Thumbtack operate on a lead generation business model. Vendors can quickly check the job listing details and pay the site if they can deliver an excellent job for it.

5. Listing Fee Business Model

Using listing fee is a widely used marketplace business model, which is especially utilized when we accord with non-financial transactions also when there is a high potential value of the listings.

Here users can buy and sell anything; there is no range and size for items as users can buy and sell anything, even real properties. Many classified websites such as Click, OLX and others are already using this business model and generating huge revenue.

Moreover, listing fees may be premium and regular. The listing visitors' see are usually brighter, larger, and are situated in a related area. Such ads are termed featured ads. 

This type of monetization method is justified when they don't look for a long-term relationship with the service provider and want to buy and sell the items occasionally. The ad listing fee is often affordable since the users rarely pay for something that is not even beneficial.

6. Featured Listings and Ads Business Model

Listing fee and ads marketplace business model enable users to publish their ads for standard and free or do it paying in a particular manner. For different businesses, such models are highly sufficient and ideal because being visible among the users tends to earn money quickly. 

But, for businesses that have few publications, it is not a sensible model. Often, featured listings and ads are utilized when it is free to utilize a website; however, to be unique, users are required to pay.

Moreover, to make this model suitable and sustainable for your business, you must have a decent number of users. Gumtree or Wallapop are some of the top names using this business model.

In a nutshell!

Now you know the types of marketplace business models available that you can choose as per your business needs. All such information can assist you in choosing the best marketplace business model for your case. 

Trying out models to search for the best and dedicated option for your business might be a good idea. However, starting with a new business model might be risky; therefore, it is better to go on with the best way that has already benefitted several businesses.