A marketplace is a platform where buyers and sellers interact and transact. The platform acts as a marketplace that will generate revenues in fees from one or all the parties involved in the transaction. Usually, marketplaces can be classified in several ways, like those selling services vs. products or those connecting buyers and sellers at B2B, B2C, or C2C level. And those marketplaces connecting two core players, or more.
Based on the kind of thing sold on the marketplace we can break them down into:
Service.
Products.
Based on the nature of the people or companies interacting though the marketplace we can break them down into:
B2B.
B2C.
C2C.
Based on the number of players interacting and transacting on the platform, marketplaces can be broken down into:
Two-sided.
Three-sided.
Multi-sided.
Marketplaces case studies
Etsy’s product marketplace
Etsy is a two-sided marketplace for unique and creative goods. As a marketplace, it makes money via transaction fees on the items sold on the platform. Etsy’s key partner is comprised of sellers providing unique listings, and a wide organic reach across several marketing channels.
Uber Eats three-sided marketplace
Uber Eats is a three-sided marketplace connecting a driver, a restaurant owner, and a customer with the Uber Eats platform at the center. The three-sided marketplace moves around three players: Restaurants pay commission on the orders to Uber Eats; Customers pay the small delivery charges, and at times, cancellation fee; Drivers earn through making reliable deliveries on time.
LinkedIn two-sided marketplace
LinkedIn for Business is used on a very large scale, around 30 million+ brands and businesses are using it. LinkedIn marketing tools available for each business size and sort, from small to large and B2B to B2C. LinkedIn is the most effective marketing tool not only for salespeople but also for brands and to build a strong corporate brand.
Company
Marketplace Business Model
Case Study
Analysis
Airbnb
Peer-to-Peer Accommodation Rental
Airbnb’s global platform for short-term rentals
Airbnb connects travelers with hosts, facilitating accommodation bookings and creating a new sharing economy.
Uber
Ride-Hailing and Transportation
Uber’s ride-hailing platform
Uber revolutionized the transportation industry by connecting riders with drivers through a user-friendly app.
Amazon
E-commerce Marketplace
Amazon’s online marketplace
Amazon’s vast e-commerce marketplace connects buyers and sellers, offering a wide range of products and services.
Etsy
Handmade and Artisanal Goods Marketplace
Etsy’s platform for artisans and crafters
Etsy provides a platform for artisans to sell their unique handmade products to a global audience.
Upwork
Freelance Talent Marketplace
Upwork’s platform for freelancers and clients
Upwork connects businesses with freelance talent for various projects, spanning from writing to programming.
eBay
Online Auction and Sales Marketplace
eBay’s platform for auctions and sales
eBay allows individuals and businesses to buy and sell a wide range of goods through auctions and direct sales.
Alibaba Group
B2B and B2C E-commerce Marketplace
Alibaba’s e-commerce and wholesale platforms
Alibaba connects global buyers and sellers, facilitating trade and e-commerce transactions on a massive scale.
Turo
Peer-to-Peer Car Rental
Turo’s platform for car owners and renters
Turo enables individuals to rent their vehicles to travelers, disrupting the traditional car rental industry.
Fiverr
Freelance Services Marketplace
Fiverr’s platform for freelance services
Fiverr offers a marketplace for freelancers to offer a wide range of services, from graphic design to content writing.
TaskRabbit
On-Demand Task and Service Marketplace
TaskRabbit’s platform for taskers and clients
TaskRabbit connects individuals with skilled taskers who can complete a variety of household and business tasks.
OpenTable
Restaurant Reservation Marketplace
OpenTable’s platform for restaurant reservations
OpenTable allows users to book restaurant reservations and helps restaurants manage their tables efficiently.
StockX
Sneaker and Collectibles Marketplace
StockX’s platform for sneakers and collectibles
StockX provides a marketplace for authenticated sneaker and collectible sales, ensuring transparency and trust.
Poshmark
Fashion Resale Marketplace
Poshmark’s platform for fashion resale
Poshmark connects fashion enthusiasts to buy and sell gently used clothing and accessories.
Thumbtack
Local Services Marketplace
Thumbtack’s platform for local service providers
Thumbtack helps users find and hire local service professionals, from plumbers to wedding photographers.
HomeAway (Vrbo)
Vacation Rental Marketplace
HomeAway’s platform for vacation rentals
HomeAway offers a marketplace for vacation rentals, connecting travelers with property owners.
Booking.com
Hotel and Accommodation Booking
Booking.com’s online travel agency platform
Booking.com enables travelers to book hotels and accommodations worldwide, serving as an intermediary between customers and hotels.
Zillow
Real Estate Marketplace
Zillow’s platform for buying and selling homes
Zillow provides tools for home buyers, sellers, and renters, simplifying the real estate process.
Freelancer.com
Freelance Job Marketplace
Freelancer.com’s platform for freelance jobs
Freelancer.com connects employers with freelancers to complete a wide range of projects, from software development to graphic design.
Rover
Pet Services Marketplace
Rover’s platform for pet care services
Rover connects pet owners with pet sitters and walkers, offering a range of pet care services.
99designs
Design Services Marketplace
99designs’ platform for design contests
99designs hosts design contests, allowing businesses to receive custom designs from a global community of designers.
Key Highlights
Definition of a Marketplace: A marketplace is a platform where buyers and sellers interact and conduct transactions. The platform generates revenue through fees charged to the parties involved in the transactions.
Marketplace Classification: Marketplaces can be classified based on various factors, such as the type of goods (services or products) being sold, the nature of the participants (B2B, B2C, C2C), and the number of players involved (two-sided, three-sided, multi-sided).
Types of Marketplaces:
Service and Product: Marketplaces can offer services or physical products for sale.
Participant Nature: Marketplaces can connect businesses to businesses (B2B), businesses to consumers (B2C), or consumers to consumers (C2C).
Number of Players: Marketplaces can involve two core players, three core players, or multiple players.
Marketplace Case Studies:
Etsy: Etsy is a two-sided marketplace focused on unique and creative goods. It earns revenue through transaction fees from items sold on the platform. Key partners include sellers providing listings and various marketing channels for organic reach.
Uber Eats: Uber Eats is a three-sided marketplace connecting drivers, restaurant owners, and customers. Restaurants pay commission, customers pay delivery charges, and drivers earn through reliable deliveries.
LinkedIn: LinkedIn serves as a two-sided marketplace where businesses connect with brands. It’s a valuable marketing tool for both B2B and B2C interactions, offering various marketing tools for different business sizes.
Benefits and Impact: Marketplaces enable efficient interactions between buyers and sellers, providing a convenient platform for transactions. They contribute to the growth of various businesses and industries by connecting them to a wider audience and facilitating trade.
Aspect
Description
Advantages
Drawbacks
Examples
Facilitator of Transactions
Marketplace businesses act as intermediaries that facilitate transactions between buyers and sellers. They provide a platform where products or services can be listed, discovered, and purchased. The marketplace operator earns a commission or fee for each successful transaction.
– Large customer base: Marketplaces can attract a wide range of buyers and sellers, leading to increased transaction volume. – Scalability: Marketplaces can expand rapidly without the need to own inventory or provide services directly. – Revenue generation: Operators earn commissions or fees from transactions. – Network effects: As more participants join, the marketplace becomes more valuable to both buyers and sellers.
– Competition: Marketplaces often face competition from other platforms in the same niche or industry. – Trust and safety: Ensuring trust between buyers and sellers can be challenging and requires robust mechanisms for handling disputes and fraud. – Operational complexity: Maintaining and moderating a marketplace can be resource-intensive, particularly as it grows. – Balancing interests: Striking a balance between the needs of buyers and sellers can be challenging, as their interests may sometimes conflict.
Airbnb, Amazon, eBay
Subscription Model
Some marketplaces offer subscription-based services to either buyers or sellers. Buyers might pay for premium access, which includes benefits like faster shipping or exclusive discounts. Sellers might subscribe for enhanced visibility or tools to manage their listings effectively.
– Recurring revenue: Subscription fees provide a consistent income stream for the marketplace operator. – Enhanced user experience: Subscribers often receive premium features or benefits, improving their overall experience. – Incentivizes loyalty: Subscribers are more likely to stick with the platform and engage in more transactions.
– Balancing free and premium services: Offering too few or too many features to subscribers can impact user satisfaction. – Acquisition challenges: Attracting subscribers can be challenging, particularly if the value proposition is not compelling. – Pricing sensitivity: Setting subscription prices at the right level can be tricky, as it needs to provide value while remaining affordable. – Competition: Other marketplaces may also offer subscription models, leading to competition for subscribers.
Amazon Prime, LinkedIn Premium, Etsy Plus
Vertical or Niche Focus
Some marketplaces concentrate on specific niches, industries, or verticals. These marketplaces cater to the unique needs and preferences of a particular audience, often providing a curated selection of products or services.
– Targeted audience: Niche marketplaces can attract a specific, highly motivated customer base. – Specialization: Focusing on a niche allows the marketplace to understand the unique challenges and opportunities of that industry. – Reduced competition: Operating in a niche can mean less competition from larger, general-market platforms.
– Limited growth potential: Niche marketplaces may have a smaller addressable market compared to broader platforms. – Market fluctuations: Specializing in a particular industry can make the marketplace susceptible to economic shifts affecting that industry. – Finding the right niche: Identifying a profitable niche and understanding its dynamics can be challenging. – Scaling challenges: Expanding beyond the initial niche while maintaining the niche’s appeal can be tricky.
Houzz, Reverb, StockX
Peer-to-Peer (P2P) Models
P2P marketplaces connect individuals or peers who want to buy and sell goods or services directly with each other. The marketplace operator facilitates these transactions and typically earns a commission or fee for doing so.
– Decentralized: P2P models empower individuals to participate as both buyers and sellers. – Efficient use of resources: P2P platforms can make use of underutilized assets, such as spare rooms or personal vehicles. – Community building: P2P marketplaces often foster a sense of community among participants. – Cost-effective: Operating costs can be lower since there is no need for extensive inventory or physical assets.
– Trust and safety: Ensuring trust and security between peers can be challenging. – Quality control: Maintaining consistent quality standards for products or services can be difficult. – Legal and regulatory challenges: P2P marketplaces may encounter regulatory hurdles or face legal issues in some regions. – Disputes: Handling disputes between peers requires effective mechanisms and can be resource-intensive.
Airbnb, Uber, Poshmark
Auction-Based Models
Auction marketplaces allow sellers to list items for auction, where potential buyers bid on them. The highest bidder wins the item, and the transaction is completed. Auctions can be time-bound, and sellers may set reserve prices to ensure a minimum selling price.
– Competitive pricing: Auctions can result in higher prices when multiple buyers compete for an item. – Unique items: Auctions are well-suited for unique or collectible items with uncertain market values. – Entertainment value: Some users enjoy the excitement and suspense of auction-style bidding. – Revenue from listing and final value fees: Operators earn fees from sellers for listing items and from successful auctions.
– Uncertain revenue: Auction outcomes are unpredictable, and the final selling price may be lower than expected. – Complex pricing structure: Managing listing fees, final value fees, and other charges can be complex. – Limited appeal: Auction models may not be suitable for all types of products or services. – User learning curve: New users may find auction platforms daunting or confusing.
eBay, Christie’s, Sotheby’s
Freemium or Premium Listings
Some marketplaces offer a freemium model where basic listings or features are free for sellers, while premium listings or advanced tools require payment. This approach can attract a broad range of sellers while monetizing the needs of more advanced or larger businesses.
– Attracts a large number of sellers, including small businesses and individuals. – Upselling opportunities: Sellers may choose premium features as their businesses grow. – Diverse product catalog: Freemium models can result in a wide variety of listings. – Scalable revenue model: Premium listing fees provide a scalable income stream.
– Balancing free and premium offerings: Ensuring that premium features provide sufficient value to justify the cost. – Competitive pricing: Determining the right pricing structure for premium features can be challenging. – User experience: Avoiding excessive advertisements or upsell prompts is crucial for user satisfaction. – Competition with other marketplaces: Users may compare the value of premium features with other platforms.
Amazon has a diversified business model. In 2021 Amazon posted over $469 billion in revenues and over $33 billion in net profits. Online stores contributed to over 47% of Amazon revenues, Third-party Seller Services, Amazon AWS, Subscription Services, Advertising revenues and Physical Stores.
DoorDash is a platform business model that enables restaurants to set up at no cost delivery operations. At the same time, customers get their food at home and dashers (delivery people) earn some extra money. DoorDash makes money by markup prices through delivery fees, memberships, and advertising for restaurants on the marketplace.
Etsy is a two-sided marketplace for unique and creative goods. As a marketplace, it makes money via transaction fees on the items sold on the platform. Etsy’s key partner is comprised of sellers providing unique listings, and a wide organic reach across several marketing channels.
Uber is a is two-sided marketplace, a platform business model that connects drivers and riders, with an interface that has elements of gamification, that makes it easy for two sides to connect and transact. Uber makes money by collecting fees from the platform’s gross bookings.
Uber Eats is a three-sided marketplace connecting a driver, a restaurant owner and a customer with Uber Eats platform at the center. The three-sided marketplace moves around three players: Restaurants pay commission on the orders to Uber Eats; Customers pay the small delivery charges, and at times, cancellation fee; Drivers earn through making reliable deliveries on time.
An effective business model has to focus on two dimensions: the people dimension and the financial dimension. The people dimension will allow you to build a product or service that is 10X better than existing ones and a solid brand. The financial dimension will help you develop proper distribution channels by identifying the people that are willing to pay for your product or service and make it financially sustainable in the long run.
Business model innovation is about increasing the success of an organization with existing products and technologies by crafting a compelling value proposition able to propel a new business model to scale up customers and create a lasting competitive advantage. And it all starts by mastering the key customers.
Digital and tech business models can be classified according to four levels of transformation into digitally-enabled, digitally-enhanced, tech or platform business models, and business platforms/ecosystems.
A digital business model might be defined as a model that leverages digital technologies to improve several aspects of an organization. From how the company acquires customers, to what product/service it provides. A digital business model is such when digital technology helps enhance its value proposition.
A tech business model is made of four main components: value model (value propositions, mission, vision), technological model (R&D management), distribution model (sales and marketing organizational structure), and financial model (revenue modeling, cost structure, profitability and cash generation/management). Those elements coming together can serve as the basis to build a solid tech business model.
A platform business model generates value by enabling interactions between people, groups, and users by leveraging network effects. Platform business models usually comprise two sides: supply and demand. Kicking off the interactions between those two sides is one of the crucial elements for a platform business model success.
A Blockchain Business Model is made of four main components: Value Model (Core Philosophy, Core Value and Value Propositions for the key stakeholders), Blockchain Model (Protocol Rules, Network Shape and Applications Layer/Ecosystem), Distribution Model (the key channels amplifying the protocol and its communities), and the Economic Model (the dynamics through which protocol players make money). Those elements coming together can serve as the basis to build and analyze a solid Blockchain Business Model.
In an asymmetric businessmodel, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus have a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility.
In an asymmetric businessmodel, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus having a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility. This is how attention merchants make monetize their business models.
While the term has been coined by Andrew Lampitt, open-core is an evolution of open-source. Where a core part of the software/platform is offered for free, while on top of it are built premium features or add-ons, which get monetized by the corporation who developed the software/platform. An example of the GitLab open core model, where the hosted service is free and open, while the software is closed.
Cloud business models are all built on top of cloud computing, a concept that took over around 2006 when former Google’s CEO Eric Schmit mentioned it. Most cloud-based business models can be classified as IaaS (Infrastructure as a Service), PaaS (Platform as a Service), or SaaS (Software as a Service). While those models are primarily monetized via subscriptions, they are monetized via pay-as-you-go revenue models and hybrid models (subscriptions + pay-as-you-go).
Open source is licensed and usually developed and maintained by a community of independent developers. While the freemium is developed in-house. Thus the freemium give the company that developed it, full control over its distribution. In an open-source model, the for-profit company has to distribute its premium version per its open-source licensing model.
The freemium – unless the whole organization is aligned around it – is a growth strategy rather than a business model. A free service is provided to a majority of users, while a small percentage of those users convert into paying customers through the sales funnel. Free users will help spread the brand through word of mouth.
A freeterprise is a combination of free and enterprise where free professional accounts are driven into the funnel through the free product. As the opportunity is identified the company assigns the free account to a salesperson within the organization (inside sales or fields sales) to convert that into a B2B/enterprise account.
A marketplace is a platform where buyers and sellers interact and transact. The platform acts as a marketplace that will generate revenues in fees from one or all the parties involved in the transaction. Usually, marketplaces can be classified in several ways, like those selling services vs. products or those connecting buyers and sellers at B2B, B2C, or C2C level. And those marketplaces connecting two core players, or more.
B2B, which stands for business-to-business, is a process for selling products or services to other businesses. On the other hand, a B2C sells directly to its consumers.
A B2B2C is a particular kind of business model where a company, rather than accessing the consumer market directly, it does that via another business. Yet the final consumers will recognize the brand or the service provided by the B2B2C. The company offering the service might gain direct access to consumers over time.
Direct-to-consumer (D2C) is a business model where companies sell their products directly to the consumer without the assistance of a third-party wholesaler or retailer. In this way, the company can cut through intermediaries and increase its margins. However, to be successful the direct-to-consumers company needs to build its own distribution, which in the short term can be more expensive. Yet in the long-term creates a competitive advantage.
The C2C business model describes a market environment where one customer purchases from another on a third-party platform that may also handle the transaction. Under the C2C model, both the seller and the buyer are considered consumers. Customer to customer (C2C) is, therefore, a business model where consumers buy and sell directly between themselves. Consumer-to-consumer has become a prevalent business model especially as the web helped disintermediate various industries.
A retail business model follows a direct-to-consumer approach, also called B2C, where the company sells directly to final customers a processed/finished product. This implies a business model that is mostly local-based, it carries higher margins, but also higher costs and distribution risks.
The wholesale model is a selling model where wholesalers sell their products in bulk to a retailer at a discounted price. The retailer then on-sells the products to consumers at a higher price. In the wholesale model, a wholesaler sells products in bulk to retail outlets for onward sale. Occasionally, the wholesaler sells direct to the consumer, with supermarket giant Costco the most obvious example.
The term “crowdsourcing” was first coined by Wired Magazine editor Jeff Howe in a 2006 article titled Rise of Crowdsourcing. Though the practice has existed in some form or another for centuries, it rose to prominence when eCommerce, social media, and smartphone culture began to emerge. Crowdsourcing is the act of obtaining knowledge, goods, services, or opinions from a group of people. These people submit information via social media, smartphone apps, or dedicated crowdsourcing platforms.
In a franchained business model (a short-term chain, long-term franchise) model, the company deliberately launched its operations by keeping tight ownership on the main assets, while those are established, thus choosing a chain model. Once operations are running and established, the company divests its ownership and opts instead for a franchising model.
Businesses employing the brokerage business model make money via brokerage services. This means they are involved with the facilitation, negotiation, or arbitration of a transaction between a buyer and a seller. The brokerage business model involves a business connecting buyers with sellers to collect a commission on the resultant transaction. Therefore, acting as a middleman within a transaction.
Dropshipping is a retail business model where the dropshipper externalizes the manufacturing and logistics and focuses only on distribution and customer acquisition. Therefore, the dropshipper collects final customers’ sales orders, sending them over to third-party suppliers, who ship directly to those customers. In this way, through dropshipping, it is possible to run a business without operational costs and logistics management.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
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