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: creating a marketplace is not a smooth ride. It requires a great deal of thought, and above all, a great deal of thought about the choice of business model.
Is a commission-based model right for your business? Is it subscription, listing fee or other?
Find the answers to your questions and discover the different business models available, 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 world. The principle is quite simple: marketplaces charge a commission on every transaction between a seller and a buyer.
In this case, the commission represents a percentage of the transaction amount 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 with commission-based business models 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's used when a platform brings two parties together, whatever the type of transaction:
- purchase
- rental,
- service provision, 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 without invoicing, you won't be able to use this type of business model!
Subscription, the popular business model for communities
What is a subscription?
Subscription means charging the user 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.
While it may seem logical to charge sellers, it is also 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're in a very specific niche market, this type of business model may be of interest.
The great advantage of subscriptions is that they enable you to generate regular income.
👉 Be careful, however, to build up a community before you launch your marketplace, and not while you're at it!
Advertising, the audience-based business model
What's an advertising-based business model?
The advertising-based business model puts buyers and sellers in touch for free. Your remuneration will come from the advertising on your platform, which will depend on the audience.
Indeed, the more traffic there is on your site, the more advertisers will be willing to pay for their ads. The aim is to create a virtuous circle between site traffic and advertiser revenues. Highlighting users' ads can also be considered 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 mainly used by marketplaces that put users in touch with each other (C2C). But it can also be an interesting secondary business model for all types of marketplaces.
👉 Mind you, the difficulty here is to have a marketplace with a large audience. But this difficulty needs to be mitigated, because, since it's free, this model encourages user acquisition 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 :
- item price,
- the duration of the listing,
- or highlighting.
This model is attractive to sellers, as it allows them to pay only once when the item is put online, and to avoid any additional costs, unlike most business models.
☝️ Marketplaces with a listing fee business model include Leboncoin (for professionals), Etsy, etc.
Who is this business model for?
The listing fee is intended for classified ad marketplaces or platforms without online transactions.
Unlike the subscription business model, you won't have recurring revenues with the listing fee.
👉 And be careful, to keep sellers on your marketplace, you'll need to ensure a good conversion rate!
The lead fee, the business model that charges for contacts
What is 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, who will only be invoiced once a contact has been established, hence the notion of Lead.
You'll 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 for?
The lead fee is mainly intended for B2B or B2C matchmaking 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've secured a sufficient number of professionals, you'll need to focus your efforts on recruiting prospects.
Without this, your business won't be viable.
The free trial business model
What's a free trial?
The free trial business model gives users free access to the entire platform and its functionalities, but with a time limit.
After this trial period, users must pay if they wish to continue using the full range of features. The aim is to entice users with a free offer, and then to encourage them to upgrade to the paid version.
☝️ 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 primarily intended for marketplaces in SaaS format, but it can also be applied to marketplaces.
If it's difficult to get a user to switch to your paying offer, it's 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'll 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, and so on.
The aim is to create a highly attractive premium account that will 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 and others.
Who is this business model for?
The freemium model is primarily designed for platforms that offer a full range of paid services, and wish to promote their offer free of charge at first. Many platforms use advertising as a complement , and then offer a pay-per-use option that removes this sometimes annoying advertising.
👉 Be careful: your mission, and not the least important one, is to convince the user that there's a lot to be gained by switching to the premium service.
Tools to help you create your marketplace
Once you've chosen your business model, it's time to create your marketplace. A number of specialized marketplace software programs are available to support you in this sometimes complex process.
They can :
- automate certain processes,
- access detailed statistics,
- or even supportyou in your project.
🛠 For example, Medialeads is an expert in the development of B2B and B2C marketplaces. Our solution enables you to develop customized or turnkey marketplaces, SaaS or proprietary! This ultra-modular, flexible solution adapts to all your projects, and offers rates 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
It's essential for any entrepreneur to choose the right business model.
Once you've decided on your marketplace 's business model, it's hard to go back...
The creation of your business model requires a great deal of thought, diagnosis and synthesis, all of which are necessary before you can draw up your business plan!
Article translated from French