Best Monetization Strategies with Online Marketplace Model
When it comes to online marketplace models, your monetization strategies prevail over all odds. Your online marketplace model must be developed keeping the money-making technique in mind while the funding-flow should majorly be directed from the community you actually serve.
You must have heard of top online marketplace players like Amazon, Flipkart, Airbnb, Fiverr, eBay, Jet, Uber. Have you taken some time off and thought about how they make money and what monetization strategies do they follow?
If not, then we have this guide to help you create outstanding monetization strategies based on your marketplace offerings. And also help you know what strategies these players follow.
But first,
let’s understand what this online marketplace is
An online marketplace refers to a website or an app that connects vendors, shoppers and stores together. The online marketplace works as a marketplace for sellers to sell products and earn profits while for shoppers it acts as a platform where they can easily buy their favorite products in time.
So, if you have decided on marketplace model, let’s brainstorm over the monetization strategies in detail;
What are the monetization strategies for online marketplaces
Even though you can find various monetization options with online marketplace, there are three major monetization options and they include;
1. Commission fee
2. Listing fee
3. Lead fee
However, we shall not discuss only these three categories, but discuss some of other categories as well so that you can choose the better option. Let’s explore;
Commission based strategy with online marketplace
Both new and existing platforms (usually the successful and popular one) use this monetization strategy. It’s the most favorable one as the website (online marketplace) owner gets a percentage of each payment directly through the website.
The percentage of commission depends on the item sold and varies from 1% to 50%. The higher percentage rate is applicable on services while there is a lower percentage rate on material products.
Besides, there are three main types of commission fees, they are;
● Commission from vendor after each successful transaction done using the platform
● Commission from buyer during making a payment for services and products
● Commission from both vendor and buyers for utilizing the platform for buying and selling
One of the best benefits of this monetization model is that it does not restrict you to combine other monetization strategies. You can take examples of eBay, Uber, Booking.com, Rakuten and others.
Selling based monetization strategy
Selling based monetization is similar to commission or transactional based. However, the only difference it has is the platform receives selling fees before the vendor gets the payment. It’s the second most popular monetization model after transactional one.
Selling fee strategies can be categorized into three main categories;
● Direct payments
● Collective payments
● Parallel payments
Direct payment refers to when a customer makes payments into sellers’ accounts directly.
Collective payment refers to when payment is made to a platform and the website owner sends the revenue to the sellers after cutting its fees.
Parallel payment refers to when a customer makes a full payment and the website payment settings divides the payment between sellers and the platform.
Initially, you may have to work hard or wait for a period of time to get the desired results. Usually, it is beneficial for a large retail website, selling a large quantity of products daily. Before you consider this monetization strategy, you need to focus on earning more customers and their trust.
Listing based monetization
Listing fee is yet another significant monetization strategy that companies like eBay, Etsy, and other marketplace charges from vendors. It can be combined with other monetization strategies as well. For example, along with transaction-based commission fees, platforms can charge a lower listing fee to list the products and services on the marketplace (website).
However, the marketplace needs to ensure that listing provides value to their money. For example, the quality of listings should be the main focus point and provide the size that is hard to ignore for vendors.
Listing fee is important as it will enable sellers to put more thought into it while spammers would get discouraged. The quality service will have a boosting impact.
Lead based monetization strategies
Lead fee refers to transactions done outside of the platform. This model is widely popular among sellers who look for browsing a list of customers looking for relevant products and services.
The charges are applicable when vendors show interests in the lists of interested customers and look for customers’ details. Vendors have to pay a fee per details, though it may vary from one marketplace to another.
In most cases, browsing is free and fee is applicable only when vendors want access to list (customers’ details). Lead fee aka pay-per-lead is popular among dating sites and professional sites.
Subscription based monetization with online marketplace
Did you know eBay, LinkedIn and many other marketplaces earn through subscriptions? In this marketplace business model, the website charges users for using services. However, this model works for the website or marketplace whose value offering is significantly high.
LikkedIn, for example, is the most popular professional site, offering users connect with highly skilled professionals worldwide. It offers two types of subscription options to users — freemium and premium. Something similar can be applied in your case as well.
Advertising fee-based strategies
In this model, marketplace allows vendors, sellers, or third-party advertisers to promote their products and services. The core revenue generation is done through publishing ads.
This very much popular way of earning money, though allowing advertisers to promote thier businesses on your website may be annoying to your potential customers. Therefore, it is important to take the call wisly.
The ad templates vary and it could be in the form of graphics, banners, texts and mixed one. Therefore, you must decide whether the portion and position of the website should be allocated for ads.
Remember: Ads drive users away.
One of the biggest challenges you may have to face in this case is you may not be able to control the quality of third party advertising, and you may end up losing your potential clients, visitors, and users.
However, if your vision is to start a marketplace like Facebook, Twitter, and LinkedIn, then you are right with your decision.
SEE ALSO: Top 9 Elements of Business Plan that Every Entrepreneur should Know
Final Thoughts
When it comes to the monetization model for online marketplace, you can find plenty of ways to earn money. However, you need to ensure what types of marketplace you want to build, and which monetization strategies will fit into it.
