Marketplace: what business model should you choose to boost your growth?
Marketplaces are experiencing explosive growth, and many people want to ride this wave of success.
But be careful not to get your wings burnt: setting up a marketplace is not a smooth ride. Setting up a marketplace requires a great deal of thought and, above all, a great deal of thought about the choice of business model.
Is commission appropriate for your business? Or is it a subscription, listing fee or other model?
Find the answers to your questions and discover the different existing business models, so you can find the one that suits you best!
Which business model for your marketplace?
Commission, the most common business model
What is a commission-based business model?
Commission is the most widespread business model in the marketplace sector. The principle is quite simple: marketplaces charge commission on each transaction between a seller and a buyer.
In this case, the commission represents a percentage of the amount of the transaction between the two parties (buyer and seller) or a fixed amount. It's also up to the marketplace to choose who it wants to charge. The commission can be charged either to the buyer or to the seller, or even to both.
☝️ Marketplaces whose business model is based on commission include Amazon, Airbnb and Uber.
Who is this business model designed for?
The commission-based business model is suitable for the vast majority of projects. It is used when a platform brings two parties together, whatever the type of transaction:
- purchase
- rental
- provision of services, etc.
👉 But be careful, we're talking about a " transaction" here, so if your project consists of a platform that puts people in touch with each other but doesn't charge for it, you won't be able to use this type of business model!
Subscription, the popular business model for communities
What is a subscription?
Subscription involves charging users a fixed or variable fee, usually on a monthly basis. The subscription business model can either be added to the commission or stand on its own.
Even if it seems logical to charge sellers, it is still possible to charge buyers.
☝️ Marketplaces with subscription-based business models include Costco, Amazon Prime and others.
Who is this business model designed for?
Subscriptions are best suited to marketplaces with very strong and, above all, very loyal communities. If you are in a very specific niche market, this type of business model may be of interest.
The great advantage of a subscription is that it will give you regular income.
👉 Be careful, though, to build up a community before you launch and not while you're launching your marketplace!
Advertising, the audience-based business model
What is an advertising-based business model?
The advertising-based business model puts buyers and sellers in touch with each other free of charge. Your income will come from advertising on your platform, which will depend on the audience.
The more traffic there is on your site, the more advertisers will be prepared to pay for their advertising. The aim is to create a virtuous circle between site traffic and advertiser revenue. Highlighting users' ads can also be considered as a form of advertising!
☝️ Marketplaces whose business model is based on advertising include Facebook Marketplace, Leboncoin, etc.
Who is this business model designed for?
Advertising is a model used mainly by marketplaces that put users in touch with each other (C2C). But it can be an interesting secondary business model for all types of marketplaces.
👉 Mind you, the difficulty here is having a marketplace with a large audience. But this difficulty needs to be qualified, because, because it is free, this model encourages the acquisition of users on both sides of the platform.
The listing fee, the single-payment business model
What is a listing fee?
The listing fee business model involves charging the seller at the very moment the good or service is put online. The criteria for setting these fees are generally :
- the price of the items
- the duration of the listing
- or how long the item has been on sale.
This is an attractive model for sellers, as it allows them to pay only once when the item is put online, without having to pay any additional costs, unlike the majority of business models.
☝️ Marketplaces with a listing fee business model include Leboncoin (for professionals), Etsy, etc.
Who is this business model designed for?
The listing fee is intended more for classified ad marketplaces or platforms without online transactions.
Unlike the subscription business model, you won't have recurring revenue with the listing fee.
👉 And be careful, if you want to keep sellers on your marketplace, you'll need to ensure they have a good conversion rate!
The lead fee, the business model that charges for contacts
What is a lead fee?
The lead fee business model is a subtle blend of commission and listing fee. The principle is quite simple: the platform puts professionals in touch with each other, and they will only be invoiced once a contact has been made, hence the notion of a lead.
You will therefore need to ensure a good conversion rate if you want your business to be profitable.
☝️ Marketplaces with a lead fee business model include LesFurets, Companeo, etc.
Who is this business model designed for?
The lead fee is mainly aimed at B2B or B2C contact platforms, rather than job board-type marketplaces.
If you want your business to be successful, you need to focus on creating a network of professionals who will pay according to the number of leads they generate. Once you have a sufficient number of professionals, you need to concentrate your efforts on recruiting prospects.
Without this, your business will not be viable.
The free trial business model
What is a free trial?
The free trial business model gives users free access to the entire platform and its features, but for a limited time.
After this trial period, users must pay if they wish to continue using the full range of features. The aim is to entice them with a free offer and then to encourage them to switch to the paying offer.
☝️ The best-known platforms with advertising as their business model are Deezer, Netflix and others.
Who is this business model designed for?
Free trial is mainly intended for marketplaces in SaaS format, but it can also be applied to marketplaces.
If it is difficult to get a user to switch to your paying offer, it is advisable not to apply a trial period to full use of the marketplace, but rather to one of the non-essential "bonus" features.
☝️ Finally, if you choose this business model, you will certainly need to mix it with other sources of revenue.
The freemium model, the business model with free features
What is a freemium business model?
The freemium business model is similar to free trial. It involves giving your users free access to your marketplace while limiting usage. This limitation concerns the number of features, the quantity of use of a feature, etc.
The aim is to create a very attractive premium account that would encourage users to choose this superior, paid offer with full functionality.
💡 For example, limit the number of photos on the ad, limit sending to more than 100 contacts, etc.
☝️ The best-known platforms with advertising as their business model are YouTube, Spotify, etc.
Who is this business model for?
The freemium model is primarily designed for platforms that offer a full range of paid services and want to promote their services initially free of charge. Many platforms use advertising as a complement , and then offer a paid service that eliminates this sometimes annoying advertising.
👉 But your job, and not the least important one, is to convince the user that there is a lot to be gained by switching to the premium service.
Tools to help you create your marketplace
Once you've decided on your business model, it's time to create your marketplace. Some specialised marketplace software can help you with this sometimes complex process.
They can help you :
- automate some of your processes
- access detailed statistics
- and even helpyou with your project.
🛠 For example, Medialeads is an expert in the development of B2B and B2C marketplaces. Our solution can be used to develop bespoke or turnkey marketplaces, SaaS or proprietary! This ultra-modular and flexible solution adapts to all your projects and offers prices tailored to your needs. Medialeads is also Qualiopi-certified for training courses, so you can learn how to use and manage your marketplace.
The importance of choosing the right business model
Choosing the right business model is essential for any entrepreneur.
Once you've decided on your marketplace 's business model, it's hard to go back...
Creating your business model requires a great deal of thought, analysis and synthesis, all of which are necessary before you can draw up your business plan!
Article translated from French