Online marketplaces are revenue-generating machines for entrepreneurs. A well-monetized strategy will meet the business target to gain profit. From Amazon, Airbnb, Letgo clone script, eBay till Uber. The eCommerce giants are profitable by gathering hundreds of thousands of users & sellers. Let your business be of any scale. Revenue models and monetization methods implemented are almost similar for all marketplace.
The solution for you is already available. Here in this article, Here in this blog, take a look at the most popular revenue models,
The popular revenue model adopted by eCommerce giants to small start-ups. The owner of the website can set a margin for each successful transaction. The admin can set commission either to the sellers or to the buyers too. Product-based marketplaces prefer the commission model to service-based marketplace.
||! Buyers might not prefer commission.
! To provide enough value
- The commission-based model attracts both users and owners. The users will get charged when they receive a value in exchange, like ads or listing fees.
- The website owner gets a commission on each sale. A more number of users leads to an increase in revenue.
The big deal with the commission-based business is to provide prompt value to the users. When not done, they may part way to find the vendors to buy by avoiding the commission. Add value-added offers like order tracking, invoices to aid marketplace leakage.
Let your online marketplace has a flexible commission-based model to win trust. By increasing the number of users. Set a clear-cut transaction fee margin. Assure them that we will make commission only if you sell, underlining that our focus is to, Let you sell.
Some of the top online marketplaces with a commission-based model
Airbnb, one of the top online rental marketplaces that integrate a commission-based model. A C2C vacation rental marketplace that connects guests & hosts to rent their property.
The giant of B2C-based online marketplace. Charges their seller 0.99$ fixed for each transaction lesser to 40 items sold.
Innovative freelance marketplace that allows freelancers to offer digital services to their audience. It charges $1 for every offered service under $20. And a 5% fee for services of more than $20. Fiverr charges the service provider 20% for every job that gets done.
The subscription revenue model is in which the users get charged a recurring fee. To access the platform or marketplace, Both the sellers and buyers pay for membership. In a subscription model, you can calculate the revenue for a month, quarter, or year. The data required to calculate are available. Details like the number of current users with membership, plan, potential leads. The subscription model with flexible plans like basic, prime, and premium membership.
Also, the subscription model suits well with an online marketplace for the resources. That won’t imply transactions between the users., like dating and Couchsurfing sites.
||! Providing the best user value.
! Resolving the chicken and egg, business problem.
Pros of the Subscription revenue model
- The sustainability of this subscription model allows predicting your profit. It applies well to the marketplace that has reliable users to the services provided.
- The subscription plans are flexible. Users can pay a small amount to access the services on monthly subscriptions.
Challenges with the subscription model
- The big challenge is to give the best value for the subscribers to the money they invested. The subscription experience of the user should be worth the pay.
- The chicken and egg problem are that you won’t find users without service and vice-versa. Facilitating free trials and discounts allows potential users to experience. And, also access the platform as a trial with a free subscription for a while.
Your reputation in the market is the key to convince your potential users. Let them know they will get the best values in exchange for their money spent. Offer discounts and trials till you get a reputation in your marketplace. Also, This helps users know the reliability of your marketplace. As a result, it parts way to become regular subscribers.
Some of the marketplaces that adopt the subscription model
CouchSurfing is the exact representation of the subscription-based business model. When a new user registers the marketplace, it gives ten free message requests to the host weekly. Users can verify their profiles by paying $60 per year to get an unlimited requests facility.
Users can also verify their profiles through mutual reviewing. Upon successful review, the users can avail of the unlimited request option for 3months. Post expiry, the user should pay $60 or added a mutual review to verify the profile.
A dating website that allows users to find the people they like to get connected. It has two types of subscription plans. One is the A-List, a one-month subscription for $19.95. Also, another subscription of $9.95 per month when a user subscribed for six months. Another A-List premium one-month plan for $34.90 or $24.90 when a user subscribed for six months.
HomeExchange allows hosts to home swap with their travelers on the subscription-based plan.
Listing Fee Revenue Model
In an online marketplace, the listing fee model generates revenue when the users post ads. But, users need not pay for every ad posted. Whereas, This revenue model, the most monetized model in many classified websites.
||! Moderate income|
Pros of Listing Fee Model
- Flexible listings charges. Users can post free ads, whereas they get charged for posting ads on specific categories.
- The listing quality of the marketplace increases when they need to pay for posting the ads.
Challenges with the Listing Fee Model
The listing fee model will not apply to all Listings, except specific categories. Hence it generates moderate revenue.
When the marketplace provides good value, adapt the listing fee model as a secondary revenue.
Marketplaces that Adapts Listing Fee Model
The non-profit online classified legacy, at times, charges listing fees. On few categories to aid their services. To post a job listing in some cities of US, and to list apartment rentals in new york city. Users need to pay.
When Etsy launched, it offered its users to post free listings for a month. When the trial expires, it charges 0.20$ for every listing. Yet, it decreases the number of listings. The efficiency of the existing listings increased.
Freemium Revenue Model
This revenue model applies to the marketplace that adapts free and premium features. Also, a little tricky to work with the freemium model. Thus you need to give striking premium features for the users.
||! Hard to convert free users into paid
! Hard to gain more revenue
Pros of Freemium Model
- The word Free attracts more buyer attention, thus fastens the lead generation.
- With no limit on listings, users can post ads whenever needed.
Challenges with the Freemium Model
- The biggest deal is to convert the free users to paid users. For premium users, significant features added to worth every penny they spent.
- It is tough to generate revenue from paid users except in specific categories. Moreover, users prefer fee services. Thus, it is better to use the freemium model as a secondary revenue factor.
The marketplace that adapts Freemium Model
As explained above, Craigslist, the top online classified website in the world. It’s free to post generic ad posts on craigslist. Yet, categories like real estate need to pay to list their ads.
To conclude, every revenue model has its pros and cons. Moreover, The Mixed-revenue model results in a sustaining online marketplace. Make Sure you are always keen on the user’s convenience. Flexible monetizing methods will always reap great results to your online marketplace.