Investing in an online marketplace business is very simple but running that successfully is very challenging for most startups. Because of improper planning in the monetization model and lack of knowledge in selecting the sustainable revenue model. Numerous entrepreneurs shut off their businesses because of not getting expected revenue from that business.
Take a look throughout the blog to get an idea of monetization strategies and how to select the right one for extensive success.
Popular monetization model used in the online marketplace
There are widespread categories of monetization models. Listed below are a few,
- Commission-based
- Subscription-based
- Freemium
- Sign-up fee
- In-ads fee
- Listing fee
- Lead generation fee
- Affiliate model
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Commission-based:
It is one of the most popular online marketplace revenue models. The admin can charge a fee for every transaction done on the platform by the user. The fee might be either fixed or a percentage fee.
Benefits of using a commission-based model:
- Predictable revenue
- Sustainable revenue
- Helps in solving the supply and demand problem
- It makes your platform more profitable
Popular marketplace using the commission-based model:
Popular marketplaces like Airbnb, Etsy, Amazon, Task rabbit, Fiverr, Upwork, Rakuten, Booking.com, eBay, and Alibaba use this type of revenue model.
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Listing fee:
It is one of the best marketplace revenue models where a platform charges a fee while publishing the listing. It is known as a listing fee. It allows the service provider to display only selective and high-quality listings on the platform. The fee will be charged either on a regular or premium basis.
Benefits:
- Cheaper price when compared to a subscription model
- Reduce the risks for scams
- It helps increases the visibility
Marketplaces using listing fee:
Many on demand food delivery apps used this strategy. Top marketplaces that use listing based model are
- eBay
- Etsy
- Deliver hero
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Lead generation fee:
The lead generation model is a combination of both listing and commission fees. It gives a better value proposition than the listing method as it allows the service provider to pay only when they get in touch with their customers. The top online marketplaces that use the lead generation revenue model is thumbtack.
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Subscription fee:
A subscription-based is one of the popular revenue models in which customers have to pay a fixed fee on a regular time interval. The customer can subscribe to the services on a monthly or yearly basis. The membership fee is applicable for new customers who are interested to access the services and also for those who are about to renew their subscription.
Benefits:
- It helps predict the steady revenue
- Budget-friendly
- Offers unique experience to the customers
- Attracts more customers
Marketplaces use a subscription-based model:
- eBay
- com
- Amazon
- Couchsurfing
- Youtube
- Netflix
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Freemium
As we all know, freemium is the word derived from free and premium. It works in the way that the basic plan is free for all the customers, but the extended features will require payments.
The Freemium model allows customers to access the basic features of the platform for a limited period. Offering basic offers free of cost will attract customers to pay for their exclusive services.
Benefits:
- It helps build a customer base
- Create trust among users
- Users can easily access the platform
Popular freemium users:
- Craigslist
- Unsplash
- Amazon prime
- Ad-based fee:
The advertising fee is one of the popular revenue models as it allows third-party advertisers to post ads on the platforms. The advertisers will pay for their ads to be published on the platform. It is one of the simplest and easiest methods to gain profits.
Trending platform uses an advertising fee:
- Content promotion – Facebook, Twitter, and Linkedin.
- Video ads – Youtube, Hotstar
- Search ads – Google
- Listing ads – Zomato, Just Dial
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Affiliate model:
The affiliate revenue model allows you to earn revenue by selling someone’s products on the platform. Let’s take Trivago as an example. It lists all the hotels on their platforms and allows users to search & book the hotel. After the successful booking, it helps in generating revenue in terms of commission.
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Sign-up fee:
Collecting a fee for sign-up is the most common monetization model. It is a flat fee collected from the users who are trying to access the marketplace. It is easier to implement and also feasible in the early stages.
Steps to choose the right revenue model
Listed below are the crucial aspects that need to consider before choosing the right revenue model,
Identify your target market: Research your target market and make sure that it will satisfy the customer’s needs and requirements
Research your competitors: Competitor research is always crucial for your success and long-term growth. It helps identify the current industry trends and also able to cope
Identify your potential customers: Before choosing the right revenue streams, it is important to identify your potential customer base. It helps in giving you a competitive advantage.
Choose your right revenue streams: It is most important to select the revenue stream from the list of categories available based on your marketplace.
Conclusion
Hopefully, this blog might have helped you pick the right monetization strategy for your online marketplace.
With the right model, you can cope with the current market demands and help you generate more revenue.
Get started your online marketplace with the right platform which gives sustainable revenue for your business.
