What is a take rate? The platform’s tax explained

The take rate often refers to a fee collected by a marketplace, payment provider, or service provider for facilitating a transaction between the buyer and seller.

DefinitionThe Take Rate, in the context of business models, refers to the percentage or portion of a transaction’s value that a platform or marketplace charges as a fee or commission for facilitating the transaction between buyers and sellers. It is a revenue model commonly employed by online marketplaces, e-commerce platforms, ride-sharing services, and various digital platforms. The take rate represents the platform’s share of the transaction value and is a crucial element in the platform’s revenue generation strategy. It can be a fixed fee, a percentage of the transaction amount, or a combination of both.
Key ConceptsTransaction Facilitation: Take rate revenue is generated by acting as an intermediary between buyers and sellers, providing a platform for transactions to occur. – Revenue Model: It is a fundamental part of the platform’s revenue model and determines how much income the platform generates from each transaction. – Competitive Strategy: Adjusting the take rate can be a strategic decision to attract users or maximize profits. – Platform Growth: The take rate can influence the platform’s ability to scale and expand its user base. – Value Proposition: It affects the perceived value proposition for both buyers and sellers on the platform.
CharacteristicsVariable Models: Take rates can be fixed, tiered, or dynamic, depending on the platform’s pricing strategy. – Transaction Types: Applicable to various transaction types, including product sales, service bookings, and financial transactions. – Platform Versatility: Can be applied in a wide range of industries, from e-commerce to ride-sharing and subscription services. – Revenue Diversification: Platforms can diversify their revenue streams by offering different take rates for different services or features. – Pricing Elasticity: Changes in the take rate can influence user behavior and transaction volumes.
ImplicationsCompetitive Positioning: Setting the right take rate is crucial for competitiveness and attracting users. – Profitability: Balancing user acquisition with revenue generation to achieve profitability is a strategic consideration. – User Satisfaction: The take rate should not adversely impact user satisfaction or deter participation. – Market Dynamics: Industry competition and market conditions can influence the appropriate take rate. – Regulatory Considerations: Compliance with financial regulations may impact how take rates are structured and implemented.
AdvantagesRevenue Generation: A reliable source of revenue for platforms, allowing them to sustain operations and invest in growth. – Scalability: Can scale with transaction volumes, allowing platforms to grow without significant infrastructure costs. – Flexibility: Platforms can adjust take rates based on strategic goals and market conditions. – Diversified Income: Offers a diversified income stream when multiple transaction types are supported. – Competitive Differentiation: Allows platforms to differentiate themselves through pricing strategies.
DrawbacksUser Resistance: High take rates can discourage sellers or service providers from using the platform. – Profitability Challenges: Striking the right balance between attracting users and profitability can be challenging. – Market Competition: Intense competition may lead to lower take rates, impacting revenue. – Regulatory Hurdles: Compliance with regulations, such as price controls or antitrust laws, may limit the flexibility of take rate structures. – User Perception: Users may perceive high take rates as unfair or excessive, affecting platform reputation.
ApplicationsTake rates are prevalent in various sectors, including: – E-commerce: Platforms like Amazon and eBay charge sellers a percentage of each sale. – Ride-Sharing: Services like Uber and Lyft charge drivers a portion of fares. – Digital Advertising: Advertising platforms charge advertisers based on ad spend. – Financial Services: Online payment processors charge fees on financial transactions. – Subscription Services: Subscription platforms may charge a percentage of subscription fees for content creators.
Use CasesE-commerce Take Rate: An online marketplace charges sellers a 5% commission on each product sold through the platform. – Ride-Sharing Take Rate: A ride-sharing service charges drivers 25% of each fare collected from passengers. – Digital Advertising Take Rate: An advertising platform charges advertisers 15% of their total ad spend on the platform. – Financial Transaction Take Rate: A payment processing platform charges 2.5% on each financial transaction made through its service. – Subscription Service Take Rate: A subscription platform charges content creators 30% of the subscription fees paid by their subscribers.



Understanding take rates

Take rates are certainly nothing new and have probably existed for as long people have come together to conduct business in marketplaces.

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.

In this more traditional scenario, the take rate is usually a fee collected by an intermediary for connecting the buyer and seller.

Today, however, take rates have become more prevalent and multifaceted.

This is due to the rise of eCommerce and numerous fintech companies that have disrupted the way consumers purchase goods and services. 

In most instances, the take rate is a fee that a marketplace collects from a third-party seller or service provider for transactions on their platform.

The most obvious example is a product-centric marketplace such as Amazon or eBay where the take rate is 5-20%. 

In 2021, eBay’s take rate was 11.19%. It means that eBay takes a cut of over 11% for each transaction happening through the platform. For instance, in 2021, on a total of over $87 billion in gross merchandise value on top of the platform, the company generated almost ten billion in transaction revenues.

Take rates are also a critical source of revenue for service-based platforms such as Airbnb and Uber, with the exact rate dependent on the average order value and frequency.

Airbnb’s take rates, also called fees, that the platform charges to hosts range between 15-20%. In Q3 2022, Airbnb’s take rate was around 18.5%, compared to 18.8% in 2021 on almost a hundred million nights booked over the platform. Airbnb’s gross booking value per night was $156.44 in Q3 2022, and the total gross booking value was $15.6 billion.
In general, a Uber Eats rider might make anywhere between $15-20 an hour in the US. Uber Eats has a take rate of 17-20% on each order placed by the customer. Uber Eats riders’ hourly rates can vary based on geography and route availability.

Take rates may also apply to service providers such as PayPal or Stripe, with these companies collecting a fee for facilitating the transaction itself.

In the case of PayPal, for instance, the take rate, of transaction fee was 1.85% in 2021.

How Much Does PayPal Charge
On average, in 2022, PayPal charged a transaction fee of 1.85%, compared to 1.87% in 2021 and 2.14% in 2020.

Based on that, PayPal generated over $25 billion in transaction revenue in 2022.

In 2022, of over $27.5 billion in revenue, over $25.2 billion came from transaction revenues. Thus, transaction revenue represented 91.6% of total revenue, while revenues from other value-added services (primarily comprising revenue earned through partnerships, interest and fees from merchants and consumer credit products, interest earned on certain assets underlying customer balances, referral fees, subscription fees, and gateway services) were over $2.3 billion, representing about 8.4% of PayPal’s total revenue.

Take rates can change based on market dynamics, market consolidation/competition, and more factors.

For instance, to understand that, see the difference in take rates between Uber and Uber Eats.

Uber had a 22% take rate in 2022, compared to Uber Eat’s 20% take rate, in the same period.

In 2022, Uber mobility took 27% of each booking on the platform. At the same time, Uber Eats took 20% of each booking on the delivery platform. The take rate varies according to demand and supply but also market dynamics. In short, in periods of increased competition, the service might charge lower take rates to keep up with it. In 2022, Uber pushed on efficiency, thus raising its take rates, to move toward profitability.

In fact, post-pandemic, with travel restrictions removed, demand for mobility services surged, thus creating massive demand for Uber again.

Uber could take advantage of its network effects in the US, to charge a higher take rate, compared to the delivery market, which is still fragmented and divided among a few players.

Thus, you see how Uber Eats, at least in 2022, had a lower take rate than Uber.

Those dynamics will change over time based on the market structure and how consolidated or fragmented that is.

Many platform business models operating in various industries operate according to the winner-take-all effect.

Or the belief that a market will consolidate around two or a maximum of three large players that will enjoy, at a certain point, monopoly status.

Calculating take rate

To calculate the take rate, we’ll return to the example of a product-centric marketplace such as Amazon.

The calculation itself involves simple arithmetic, but it is sometimes more difficult to find the relevant data in the company’s financials.

What’s more, in the case of Amazon, the take rate also varies based on the product category.

Nevertheless, take rate can be calculated by dividing the:

The Gross Merchandise Volume (GMV) by the total referral fees (commissions).

If an eCommerce company had a GMV of $500 million and $50 million in referral fees from the sale of electronics in 2022, the take rate for that product category would be 10%.

For payment providers and related services, the calculation is more simple.

If a consumer uses PayPal to buy a new camera for $1000, the payment provider may pay the seller $970 and keep the remaining $30 (equivalent to a 3% take rate).

Further applications of take rate

More broadly, take rate can be used to reference the number of users who perform a certain action.

The metric is used in traditional marketing funnels to reflect the fact that these funnels contain multiple stages. 

For instance, take rate may refer to the percentage of prospects who clicked on an ad or signed up for a newsletter.

This should not be confused with conversion rate, which commonly refers to the percentage of users who performed one of the aforementioned actions and then went on to purchase the product.

Outside of a standard marketing funnel, a meal subscription company’s take rate may be the percentage of its customers who ordered a particular meal out of all the meals on its menu.

It may also define the take rate to be a measure of how many meals were purchased in a specific time period as a percentage of the total number of orders over a week, month, season, etc. 

Key takeaways

  • Most often, the take rate refers to a fee collected by a marketplace, payment provider, or service provider for facilitating a transaction between the buyer and seller.
  • Take rates are also a critical source of revenue for service-based platforms such as Airbnb and Uber, with the exact rate dependent on the average order value and frequency. For product-based marketplaces, take rate depends on the product category and Gross Merchandise Volume (GMV).
  • Take rate can be used more broadly to reference the number of users who perform a certain action. These actions may pertain to the various stages of a traditional marketing funnel or any other action of the company’s choosing. 

Key Insights

  • Definition of Take Rates: Take rates refer to the fees collected by marketplaces, payment providers, or service providers for facilitating transactions between buyers and sellers.
  • Evolution of Take Rates: Take rates have been around as long as marketplaces have existed but have become more prevalent and diverse with the rise of eCommerce and fintech companies.
  • Examples of Take Rates: Product-centric marketplaces like Amazon and eBay typically have take rates of 5-20%, while service-based platforms like Airbnb and Uber charge take rates of 15-20% on average.
  • PayPal’s Take Rate: As a payment provider, PayPal charges a transaction fee that was 1.85% in 2021, generating over $25 billion in transaction revenue.
  • Varied Take Rates: Take rates can vary based on market dynamics, competition, and market structure. Uber’s mobility service had a 27% take rate in 2022, while Uber Eats had a 20% take rate during the same period.
  • Calculation of Take Rate: Take rate can be calculated by dividing Gross Merchandise Volume (GMV) by total referral fees or commissions. For payment providers, it’s simply the fee they retain from a transaction.
  • Broad Applications: Take rate can also be used to reference the percentage of users who perform specific actions in marketing funnels or other contexts, reflecting the stages of user interactions.
  • Significance for Revenue: Take rates are a critical source of revenue for many platforms and can significantly impact a company’s financials and profitability.

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What’s A Business Model

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

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.

Level of Digitalization

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.

Digital Business Model

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.

Tech Business Model

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.

Platform 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.

AI Business Model


Blockchain Business Model

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.

Asymmetric Business Models

In an asymmetric business model, 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.

Attention Merchant Business Model

In an asymmetric business model, 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.

Open-Core Business Model

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

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 Business Model

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.

Freemium Business 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.

Freeterprise Business Model

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.

Marketplace Business Models

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 vs B2C Business Model

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.

B2B2C Business Model

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.

D2C Business Model

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.

C2C Business Model

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.

Retail Business Model

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.

Wholesale Business Model

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.

Crowdsourcing Business Model

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.

Franchising Business Model

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.

Brokerage Business 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 Business Model

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.

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