7 Different Types of Marketplace Business Models That Actually Work

How do you measure the true success of an online marketplace? Is it by the number of active users, the volume of products listed, or the amount of money invested? Actually, it all boils down to how effectively your marketplace generates revenue – and in 2025, the marketplace model has become the dominant force in eCommerce.

Marketplaces now account for 67% of global online sales, a dramatic rise from just 40% in 2014. With the global marketplace sector valued at $580 billion in 2024 and projected to reach $1.06 trillion by 2030, understanding marketplace business models has never been more critical for entrepreneurs and established businesses alike. Marketplaces are growing six times faster than traditional eCommerce, with platforms like Amazon, Airbnb, and Etsy leading the charge.

In this guide, we’ll explore what a marketplace business model is, examine the different types of marketplaces, dive into the advantages and disadvantages of operating a marketplace, and highlight the most popular marketplace revenue models with examples from marketplace giants. By understanding these fundamentals, you will be able to choose the best marketplace business model to maximize your platform’s profitability in 2025 and beyond.

What is a Marketplace Business Model?

A marketplace business model refers to a business structure where a digital platform facilitates transactions between multiple buyers and sellers, enabling them to trade goods or services online. Unlike traditional retail, where a single vendor sells directly to customers, or traditional eCommerce where a single company owns all inventory, marketplaces aggregate many sellers under one digital roof. These platforms earn revenue through various methods such as commissions, subscriptions, or listing fees, depending on their chosen revenue strategy.

Marketplaces typically do not hold inventory themselves, allowing them to scale quickly by attracting a wide range of sellers and offering extensive choices to consumers. Well-known examples include Amazon, Airbnb, and Etsy, each of which has leveraged the marketplace model to successfully connect buyers and sellers at scale.

Key Elements of a Marketplace Business Model

A successful marketplace business model is built on several core elements that differentiate it from traditional retail or eCommerce:

1. Multi-sided Platform: Unlike traditional retail where one entity sells to customers, marketplaces facilitate interactions between multiple independent sellers and buyers on a unified platform.
2. Value Creation Without Inventory: Marketplaces typically don’t own the products or services being sold. Instead, they create value by providing infrastructure, tools, and trust mechanisms that enable transactions.
3. Network Effects: The platform becomes more valuable as more users join. More sellers attract more buyers, and more buyers attract more sellers, creating a self-reinforcing growth cycle.
4. Technology-Driven Operations: Marketplaces leverage technology to automate processes like payment processing, dispute resolution, search and discovery, and transaction management.
5. Revenue Through Facilitation: Rather than profiting from product margins, marketplaces earn revenue by facilitating transactions through various monetization models like commissions, subscriptions, or fees.

Marketplace vs. Traditional Retail vs. eCommerce: What’s the Difference?

Understanding how marketplaces differ from other business models is crucial:

Feature	Traditional Retail	eCommerce Store	Marketplace
Inventory Ownership	Owns all inventory	Owns all inventory	Typically owns no inventory
Number of Sellers	Single seller	Single seller	Multiple independent sellers
Scalability	Limited by physical space and inventory	Limited by inventory management	Highly scalable without inventory constraints
Risk	High inventory risk	Moderate inventory risk	Low inventory risk
Revenue Model	Product margins	Product margins	Commissions, fees, subscriptions
Capital Requirements	High (real estate, inventory)	Moderate (inventory, warehousing)	Lower (technology, platform)
Examples	Walmart, Target	Apple, H&M, Nike	Amazon, Etsy, Airbnb

Difference between marketplaces vs. traditional retail vs. eCommerce

The marketplace model shifts the emphasis from direct sales to empowering third-party sellers, creating an ecosystem that thrives on variety, competition, and efficiency.

Benefits of a Marketplace Business Model

• Scalability and Growth Potential:
  Marketplaces easily scale because they don’t typically handle inventory or logistics. This approach allows rapid growth by adding new sellers and products with minimal additional costs.
• Reduced Operational Costs:
  Since sellers manage their own inventory and fulfillment, marketplaces reduce overhead and operational expenses compared to traditional retail businesses.
• Diverse Product Selection:
  Offering products and services from multiple vendors attracts a larger audience, enhancing customer retention and engagement by providing choice and competitive prices.
• Network Effect:
  As marketplaces gain more users, they become increasingly valuable to both buyers and sellers, creating a strong competitive advantage through an established user base.

Drawbacks of a Marketplace Business Model

• High Competition Among Sellers:
  A large number of vendors leads to intense competition, making it harder for individual sellers to differentiate themselves and potentially driving down profit margins.
• Reliance on Third Parties:
  The marketplace depends heavily on its sellers for product quality, availability, and customer service. Poor performance by sellers can negatively impact the platform’s reputation.
• Complex Management and Moderation:
  Maintaining trust, handling disputes, and ensuring consistent service quality across numerous sellers requires significant investment in moderation, technology, and customer support.
• Difficulty Building Brand Identity:
  Sellers have limited opportunities to build their own brand identity since the marketplace itself typically controls the branding, design, and user experience.

To quickly summarize, here’s a concise overview of the main benefits and challenges associated with running a marketplace business:

✅ Pros of Marketplace Business Model	❌ Cons of Marketplace Business Model
High Scalability (Easy to grow without handling inventory)	High Competition (Difficult for sellers to stand out)
Lower Operational Costs (Sellers handle inventory and logistics)	Dependency on Sellers (Reliance on sellers for service quality and fulfillment)
Wide Product Variety (Multiple vendors provide extensive choices)	Complex Platform Management (Need for extensive moderation and dispute handling)
Strong Network Effect (More users enhance platform value)	Limited Brand Control (Difficult for sellers to build individual brand identities)

Marketplace Business Model – Key Advantages and Disadvantages

Types of Marketplaces

Before diving into revenue models, it’s essential to understand the different types of marketplaces based on their participants, focus, and scope. Choosing the right marketplace type significantly impacts your revenue strategy, target audience, and growth potential.

Based on Participants: B2B, B2C, and C2C Marketplaces

B2B (Business-to-Business) Marketplaces

B2B marketplaces connect businesses with other businesses, facilitating wholesale transactions, bulk ordering, and enterprise-level services.

Characteristics:

• Complex purchasing processes with customized pricing
• Higher transaction values
• Integration with ERP and procurement systems
• Longer sales cycles with negotiation capabilities

Examples:

• Alibaba: Connects manufacturers and wholesalers globally with businesses seeking bulk products
• ThomasNet: Industrial marketplace for manufacturing and engineering suppliers
• Faire: Wholesale marketplace connecting independent retailers with brands

Revenue Models: Typically use subscriptions, lead fees, or transaction commissions with lower percentages due to high transaction values.

B2C (Business-to-Consumer) Marketplaces

B2C marketplaces enable businesses to sell products or services directly to individual consumers through a unified platform.

Characteristics:

• Standardized product listings and categories
• Integrated payment and shipping systems
• Customer reviews and ratings
• Lower transaction values but higher volume

Examples:

• Amazon: The world’s largest B2C marketplace offering millions of products
• Etsy: Marketplace for handmade, vintage, and craft products
• Uber Eats: Food delivery marketplace connecting restaurants with consumers

Revenue Models: Primarily commission-based (5-30% of transaction value), often combined with advertising and premium seller services.

C2C (Consumer-to-Consumer) / P2P (Peer-to-Peer) Marketplaces

C2C marketplaces enable individuals to buy and sell products or services directly with other consumers.

Characteristics:

• User-generated inventory
• Strong community and trust mechanisms
• Lower average transaction values
• Emphasis on secondary markets and sharing economy

Examples:

• eBay: Pioneering C2C marketplace for new and used items
• Poshmark: Social marketplace for secondhand fashion
• Vinted: C2C platform for pre-owned clothing
• Facebook Marketplace: Local buying and selling within communities

Revenue Models: Transaction fees, listing fees, or featured listings. Some use freemium models.

Based on Product Focus: Vertical vs. Horizontal Marketplaces

Vertical Marketplaces

Vertical marketplaces specialize in a specific industry, product category, or niche market, offering deep expertise and curated experiences.

Advantages:

• Deep Specialization: Expertise and trust within a specific niche
• Targeted Audience: Attracts highly engaged users with specific needs
• Higher Margins: Niche focus allows for premium pricing
• Better User Experience: Tailored features and filters for specific products
• Lower Competition: Fewer sellers in a focused space

Disadvantages:

• Limited Market Size: Smaller addressable market
• Growth Constraints: Harder to scale beyond the niche
• Higher Customer Acquisition Costs: Reaching niche audiences is more expensive

Examples:

• Houzz: Focused exclusively on home remodeling and design
• StockX: Specializes in authenticated sneakers and streetwear
• Reverb: Dedicated marketplace for musical instruments and gear
• Zocdoc: Connects patients with healthcare providers

Horizontal Marketplaces

Horizontal marketplaces offer a wide range of products or services across multiple categories, functioning as a one-stop shop.

Advantages:

• Massive Market Reach: Serves diverse customer segments
• Economies of Scale: Lower per-unit costs with volume
• Cross-Selling Opportunities: Customers buy multiple product types
• Higher Traffic: Broad appeal drives more visitors
• Network Effects: Faster growth due to larger user base

Disadvantages:

• Intense Competition: Sellers compete across many categories
• Less Differentiation: Harder to stand out in crowded marketplace
• Complex Operations: Managing diverse categories is challenging
• Quality Control: Ensuring consistency across varied product types

Examples:

• Amazon: Offers everything from books to electronics to groceries
• eBay: Broad platform spanning virtually all product categories
• Walmart Marketplace: Wide range across household essentials, electronics, apparel
• Alibaba: Covers countless product categories from machinery to textiles

Hybrid Marketplaces: The Best of Both Worlds

Hybrid marketplaces combine elements of traditional eCommerce (first-party sales) with the marketplace model (third-party sellers), giving operators more control while expanding product variety.

Characteristics:

• Platform sells its own inventory alongside third-party products
• Greater control over core product lines
• Revenue from both product margins and marketplace fees
• Ability to fill inventory gaps with third-party sellers

Examples:

• Myer: Australian department store that sells its own products and hosts third-party sellers
• Woolworths Everyday Market: Grocery chain’s marketplace extending beyond traditional groceries
• Best Buy Marketplace: Electronics retailer supplementing its inventory with third-party sellers

Revenue Models: Combines retail margins on owned inventory with commission fees on third-party sales.

Our Expertise in Developing Online Marketplaces

At Sloboda Studio, we’ve built over 10 successful marketplaces in our 8+ years of experience. Through this work, we’ve discovered that while the commission model is most common and usually most lucrative, the best revenue strategy depends on your specific market, users, and value proposition.

Greater Vacation Rentals

Greater Vacation Rental is a B2C online rental marketplace for users to book vacation accommodations. The client’s business goal was to build an online rental marketplace similar to Airbnb.

In the span of 3 months of work, we transformed our client’s idea into an MVP where users are able to:

• list and advertise their properties;
• reserve or book accommodation;
• make payments on the website itself;
• leave reviews about their experience.

Our team also created a mobile app that had all the functionalities of the website. We developed all the core features of the app and integrated external APIs for payment. 

Foody

Foody is a US-based recipe marketplace where popular chefs can share their recipes with the world.

Our client came to us with a business idea, and we needed to build a custom software marketplace from scratch where cooks and influencers would be able to monetize their content. 

Due to our cooperation with Foody company, an online marketplace was created with a stunning and user-friendly interface for everyone who loves cooking. Here are some of the features we implemented:

• Registration
• Home page
• Profiles
• Recipes and collections
• Video and image uploading
• Payments
• Admin panel
• Rates and reviews
• Clickable banner Autoscaling 

Top 7 Online Marketplace Business Models in 2025

In 2021, $3.23 trillion was spent globally on the top 100 online marketplaces. And Amazon is the leader in this category largely due to its business model to make profits.

The majority of online product marketplaces operate with one of the three basic strategies: commission, subscription, and listing fees. But actually, there are many more revenue models on the market. Each of them has its benefits and difficulties in implementation.

The table below provides a detailed breakdown of best marketplace business models. Each model is explained to provide a clear understanding of its unique characteristics, scalability, and profitability in the current market landscape.

Business Model	Description	Pros	Cons
Commission	Companies earn fees by connecting buyers and sellers, typically charging a percentage of the transaction value.	– High revenue from successful transactions. – Aligns interests of seller and platform owner.	– Requires lots of sales. – May discourage transactions due to increased costs.
Subscription	Customers pay a recurring fee to gain access to a product or service.	– Steady income for the business. – Helps build a loyal customer base.	– Some users may avoid due to regular payments. – Needs to offer interesting or new content to keep customers.
Listing Fee	Platform owners charge money to allow products or services to be listed.	– Can earn money quickly. – May attract better listings because of the listing fee.	– The extra cost can lessen the number of listings. – Too high fees can limit growth.
Freemium	Basic services are free, but users must pay for extra features or better service.	– Can draw many users with free services. – Users can try before paying.	– Can be hard to get free users to pay later. – Faces competition from other free or cheaper services.
Featured listings and ads	Companies pay to make their ads or listings more noticeable.	– Can make more money from businesses wanting more visibility. – Can help users find what they want more quickly.	– May make the website or app too busy or hard to use. – Bigger companies with more money might dominate.
Lead fee	Companies pay a fee to get the contact details of potential customers from another business.	– Companies pay only for the leads they get. – A good way to make money from the current user base.	– Not all leads may be good, which can upset customers. – Can put off buyers if they feel their details are being sold.
Mixed	This model uses different ways from various business models to make money.	– Can make money in many ways, appealing to different people. – Not depending on only one way to make money reduces risk.	– Can be hard to manage different methods at once. – Might confuse buyers with too many offerings.

Marketplace business models, a comprehensive breakdown

1. Commission Business Model

The commission model is a revenue model where a user is charged a fee for each transaction. It is by far the most popular online product marketplace business model type. When the customer pays the supplier, the marketplace charges a percentage or a fixed fee for its services.

The platform may charge either the seller or the buyer. Another scenario is taking a commission from both of them.

This marketplace revenue model is the most common since the fee is justified. Sellers and buyers may operate for free and pay only when they get some value from using the business platform. At the same time, the product marketplace gets revenue from each conversion as well.

Pros of the Commission Model

Here are some of the advantages of the commission business model:

Attracts More Suppliers

This marketplace business model is so popular since it allows online marketplaces to simplify solving the chicken and egg problem, and to attract vendors. Since sellers pay only when they sell their products or services, they do not risk any money by placing their business on this platform.

With Each Transaction, You Monetize

The commission model is a very effective marketplace revenue model. The marketplace monetizes every time a user pays for a service or product. 

Challenges of the Commission Business Model

Even with all those advantages, there are a few cons that online marketplace owners need to be aware of:

Providing Enough Value

The main challenge for commission-based online marketplaces is providing enough value for sellers and buyers. 

If your platform doesn’t offer enough value, then marketplace leakage can happen. This means that the users will try to find a way to communicate with suppliers directly rather than use your platform.

NB: How to offer enough value?

For example, you may offer them the protection of the deal, or insurance, or automate some routine work for the vendors.

Pricing

Another challenge of this marketplace business model is setting the prices for services.

To charge a percentage of each transaction or a fixed fee? Should you charge only one party or both sellers and buyers?

How much to charge to get revenue and still not discourage your customers?

There is no right answer to these questions. The method of charging money should be chosen according to your marketplace revenue model. 

For example, the pricing model will depend on whether your marketplace is seller- or buyer-oriented. 

Marketplaces Using Commission Model 

The well-known marketplaces using the commission-based marketplace business model include the following:

Airbnb

One of the biggest online marketplaces operating with the commission model is Airbnb. Airbnb is a C2C marketplace that connects hosts with people who want to rent a house or apartment while traveling for a short period.

Airbnb home page

It charges fees both from the hosts and the travelers. The property owners pay a flat service fee of 3% of the received amount of money. The guests pay a service fee of around 14%.

Amazon

Amazon Home Page

This is a B2C marketplace that sells products from different vendors on one platform. Amazon charges a fixed $0.99 fee to sellers who offer less than 40 items.

Fiverr

This is a freelance marketplace that connects freelancers who offer digital services with customers.

Fiverr Home Page

Fiverr charges customers $2 for orders up to $20. And 5.5% if the service buying is more than $50. Fiverr charges the service suppliers 20% of every job done. This is a great example of how a company successfully takes commissions from both sellers and buyers.

2. Subscription-Based Marketplace Business Models

The subscription model is a marketplace revenue model type where a user is charged a regular fee for access to the platform.

The value proposition of the online marketplaces that use a subscription model is helping the suppliers find new customers or get access to the database of potential buyers or partners.

Generally, online marketplaces that charge subscription fees do not participate in user transactions. The buyers can pay directly, for example, with a credit card. 

Another case is when the relationships between sellers and buyers do not involve money at all, for example, dating or Couchsurfing-like sites.

The subscription business model is best for those online marketplaces that do not have the resources to facilitate the transactions between the users or whose business logic does not imply them at all.

Pros of the Subscription Model

The subscription model has its advantages and disadvantages. Here are the pros:

Sustainability 

The subscription revenue model allows you to predict your monthly revenue regularly. It’s a great revenue model for the marketplace if you already have a community of trusted customers who will be willing to pay for the services provided on your marketplace regularly.

Attracts More Customers

This particular online marketplace revenue model is compelling to users since they pay a relatively small amount for the services each month instead of paying one big all at once.

Challenges of the Subscription Model

Challenges to the subscription model make it difficult to monetize:

Providing Enough Value

The main challenge of the subscription model is providing enough value so that the users understand the benefits of buying a membership. This means finding customers or partners, saving money, getting new experiences, etc.

Chicken-and-an-Egg Problem 

Another challenge is that the subscription models make it even more difficult to solve the chicken-and-an-egg problem of an online marketplace.

In the case of the commission model, the users pay only when they get money with the help of the marketplace. For example, when they have an opportunity to see the benefits themselves. So they are not risking anything.

Paying in advance may discourage potential clients from using the platform. You may overcome this difficulty by offering a free trial or discount to the new adopters of your product.

You may also create different subscription plans (such as free, basic, and premium). Plus, you can offer different rights to the users of each group.

Marketplaces Using Subscription Model

Lots of well-known marketplace examples like CouchSurfing are already implementing the subscription model:

CouchSurfing

A typical representative of the subscription model is CouchSurfing, where local people can accept travelers from all over the world.

CouchSurfing Home Page

As of 2020, upon registration, Couchsurfing requires a small fee for new users to use the platform (due to their financial struggles from COVID-19). Users need to pay $2.39 per month (or $14.29 per year), which provides access to the platform and gets them verified (Those who were already verified won’t need to pay until 2021).

OkCupid

OkCupid Home Page

OkCupid is a dating website that connects people who want to date together.

It has two paid subscription models. The first model – A-List, charges $24.90 for one month or $4.95 per month when a user signs up for six months. The second model, A-List Premium, charges $24.90 for one month or $19.90 per month when a user signs up for six months.

3. Listing Fee Marketplace Business Models

The listing fee model is an online marketplace revenue model when a marketplace charges sellers for posting ads on the platform.

While the commission-based online marketplaces charge a fee only when the item is sold, they may miss the revenue from the less popular merchandise. The listing fee model allows for tackling this problem and getting profit from each and every ad on the platform.

Pros of the Listing Fee Model

The listing fee model has an undeniable advantage over the previously considered ones.

Price

The listing fees are generally small and are much cheaper than the price of a subscription.

Listings’ Quality

The sellers pay for each advertisement and they want to get as much revenue as possible from each one. This makes them work on the quality of each item, instead of creating tons of ads hoping that they will be sold somehow. 

Challenges of the Listing Fee Model

The listing fee model also has disadvantages that should be considered:

Chicken-and-an-egg Problem 

Like the subscription model, listing fees can also make solving the chicken-or-the-egg problem more difficult. The clients pay before they get profit from the marketplace and risk their money. This may discourage them from using the platform.

In order to overcome this challenge, you may provide the new sellers with several free listings or, for example, an unlimited number of listings during a free trial period.

Difficult to Get Enough Revenue

Usually, digital marketplaces don’t charge a lot for listings. So it’s harder for platforms to sell for enough revenue to be in the black. That’s why the listing fee model is usually used as a secondary monetization model.

Marketplaces Using Listing Fee Model

The listing fee model is popular and widely used:

Etsy 

Etsy Home Page

When Etsy had just launched, it offered a promotion – a month of free listings for each of its clients.

When the trial period ended, it started charging $0.20 for each listing. This decreased the number of items listed per day but increased the efficiency of the existing ads. Paying the listing fees allows the user to post this ad for 4 months.

4. Freemium Marketplace Business Models

Freemium is a revenue model where a digital marketplace has both free and premium features. This model is a bit tricky to work with since your marketplace needs to offer very alluring premium features for users.

Pros of the Freemium Model

Here are the benefits of using the freemium business model:

Fast Lead Generation

“Free” is what grabs users’ attention the most at first. Thus while using freemium you will have more chances to:

• build a customer base
• gain trust, and only then offer premium features.

No Limitations in Using

With the freemium model, users can easily access your platform, post a listing, or communicate with each other. 

Cases when users need to pay:

1. When they want to advertise their posting 
2. When they want to post more products than a limited number of listings. 

Challenges of the Freemium Model

The freemium model also has some drawbacks which should not be ignored:

From Free to Paid

The biggest challenge is converting free users into paying ones. It’s likely that while wasting your money on supporting and attracting more free users, you won’t get much-paid ones. It takes some time. Thus, the freemium model is used as a supplementary online marketplace revenue model.  

Enough Value

The freemium model is similar to the listing fee model, they both need to offer enough value so users would want to pay for additional services.

Marketplaces Using Freemium Model

Many renowned online marketplaces use the freemium business model, such as:

Craigslist

Craigslist is a classified ad website that was created in the 1990s. With time it became one of the biggest classified marketplaces around the world.

Craigslist Home Page

Generally, posting a listing on Craigslist is free. However, there are some categories like real estate where Craigslist charges some fees.

5. Featured Listings and Ads

The featured listings and ads model is an online marketplace revenue model where sellers buy advertising privileges to enhance visibility on the platform. 

Sellers or service providers pay to have a featured listing higher than others or be at the top of a certain category provided that all other listings are free to post.

Pros of Featured Listings and Ads

The benefits of using featured listings and ads include:

Additional Revenue Stream

The featured listings and ads model can only be used as an addition to the main model. It is a great revenue model for the marketplace when you want to introduce a new revenue flow. But be aware of not overloading your marketplace with ads.

Challenges of Featured Listings and Ads

Disadvantages of the featured listing and ads include:

Hard to Monetize

With this model, it isn’t easy to get enough users interested in paying for featuring their listings. Moreover, it is even harder to have a balance between free and paying users. Usually, free users will outnumber paying users. 

Keeping Users on the Platform

Too much advertising is never good for the business. Since it may discourage your users from using your platform.

Marketplaces Using Featured Listings and Ads

The listings and Ads online marketplace revenue model is especially used with real estate marketplaces.

Zillow

Zillow is the most popular one. It charges agents and management companies for advertising their listings on a platform.

Zillow Home Page

6. Lead Fee Marketplace Business Models

The lead fee model is an online marketplace revenue model where a user posts a request, and suppliers pay the marketplace fee in order to bid for the customer.

Pros of the Lead Fee Model

The lead fee model provides a better value proposition than the listing fee model:

Value

This revenue model gives users enough value to pay to your marketplace. Since suppliers are connected with potential buyers, there is no risk for them in spending some money compared to the listing fee, where suppliers don’t know if they will ever get their potential buyers.

Challenge of the Lead Fee

The lead fee business model only works if the value of the lead is high. That is why it is not common in C2C marketplaces.

Marketplace Leakage

If a marketplace charges high lead fees then service providers are going to want to work with customers directly. 

This situation can lead to marketplace leakage. In order to avoid this situation, try to set middle to low prices on your marketplace fees. 

Marketplaces Using the Lead Fee Model

A renowned well-performing example of this model is Thumbtack.

Thumbtack

Thumbtack Home Page

This is one of the online marketplace types that connects customers with local professionals.

At Thumbtack there are 2 types of leads: exact and partial leads. With exact leads, service providers pay automatically for leads that match their preferences, no matter if they reply or not. With partial leads, service providers pay only if they accept the job.

7. Mixed Marketplace Business Models

When selecting an online marketplace revenue model for your platform, it is not necessary to choose only one of them.

The major players in the online marketplace business successfully combine several models and have several revenue sources.

Pro of the Mixed Model

The major players in the online marketplace business successfully combine several models and have several revenue sources.

Several Revenue Streams

As previously mentioned there are marketplace revenue model types that are used as a main source of income. And there are those that come as an addition to the main one. It is normal to have several monetization channels on your marketplace. Just choose the two sales models that suit your marketplace and/or your products the most.

Challenge of the Mixed Model

Every marketplace business model has its disadvantages and a mixed model is no different:

Balance Between Charging Both Parties

If your marketplace has online revenue models that only involve charging either a supplier or a customer, the paying side is likely to abandon your platform real soon. Instead of focusing on one side of your marketplace sales, introduce such models that will involve both customers and suppliers with their products.

Marketplace Examples Using the Mixed Model

Here are some well-known marketplace types that use the mixed business model:

Amazon

One of the best examples of the successful combination of several models to sell products is Amazon.

They have different seller groups with different commission models: individual sellers and pro merchants. 

The individual sellers are those who offer less than 40 goods and pay a fixed $0.99 fee for each item sold. The pro merchants pay a fixed monthly fee of $39.99. As we can see, they unite the commission and the subscription model.

Etsy

In addition to the listing fee, Etsy also charges a 6.5% commission for each sell transaction between the buyer and the seller. This helps them to get revenue right from each ad. It also gives them additional income from the sales successes.

How To Choose The Right Marketplace Business Model

Choosing the right marketplace business model is one of the most critical decisions you’ll make as a marketplace founder. The wrong choice can lead to poor user acquisition, high platform leakage, or unsustainable economics. Here’s a comprehensive framework to guide your decision:

1. Understand Your Target Market

Your target market dictates which marketplace type and revenue model will work best.

Questions to ask:

• Are you targeting businesses (B2B), consumers (B2C), or individuals trading with each other (C2C)?
• What is the typical transaction value in your market?
• How frequently do users make purchases?
• What level of trust and verification is required?

Example: If you’re targeting businesses with high-value transactions ($10,000+), a subscription or lead fee model might work better than commission, as businesses expect to pay upfront for quality leads rather than percentage-based fees on large transactions.

2. Analyze Your Product or Service Type

The nature of what’s being sold significantly impacts your revenue model choice.

Considerations:

• Transaction complexity: Can payments be easily facilitated online, or do they involve complex invoicing?
• Transaction value: High-value items (real estate, cars) make commission fees challenging
• Product variety: Wide variety makes standardized transaction processes difficult
• Frequency: One-time purchases vs. recurring needs
• Tangibility: Physical products vs. digital services vs. experiences

Example: Airbnb facilitates relatively straightforward online bookings with clear pricing, making commission fees natural. In contrast, enterprise software marketplaces often use subscriptions because licensing is complex and transactions happen offline.

3. Evaluate Revenue Potential and Unit Economics

Calculate the economics of each potential revenue model.

Key metrics to consider:

• Average transaction value (ATV): Higher ATV supports commission models
• Transaction frequency: Frequent transactions favor commissions; infrequent ones favor subscriptions
• Customer lifetime value (LTV): Higher LTV supports higher acquisition costs
• Customer acquisition cost (CAC): Must be significantly lower than LTV
• Take rate: What percentage or fee can you charge without driving users away?

Rule of thumb: Commission models work best when you can achieve at least 5-20% take rate on transactions, and when your LTV:CAC ratio is at least 3:1.

4. Assess Your Competitive Landscape

Understanding what competitors charge helps you position your pricing competitively.

Research questions:

• What revenue models are competitors using?
• What are their fee structures?
• What additional value do they provide to justify their fees?
• Are there gaps in the market for alternative models?

Example: When Thumbtack entered the home services market, they differentiated by using lead fees instead of the commission model used by competitors, appealing to service providers who preferred paying for leads rather than commissions.

5. Consider Scalability and Growth Plans

Your revenue model should support your long-term vision.

Scalability factors:

• Geographic expansion: Can your model work in different markets?
• Category expansion: If you start vertical, can you expand horizontally?
• Technology requirements: Does your model require expensive payment infrastructure?
• Operational complexity: Can you automate processes as you grow?

Example: Commission models scale exceptionally well because revenue grows automatically with transaction volume, while subscription models require continuous value delivery to prevent churn.

6. Evaluate Your Value Proposition

Your revenue model must align with the value you provide.

For sellers, marketplaces provide:

• Access to a large customer base
• Payment processing and security
• Marketing and visibility
• Trust and credibility through reviews
• Tools for inventory and order management

For buyers, marketplaces offer:

• Wide selection and variety
• Price comparison capabilities
• Convenience and ease of use
• Trust through reviews and ratings
• Buyer protection programs

Critical insight: If users don’t perceive enough value, they’ll circumvent your platform (platform leakage), especially with commission and lead fee models that charge per transaction.

7. Start Simple, Then Evolve

Many successful marketplaces start with one revenue model and evolve over time.

Recommended approach:

1. Launch with one primary revenue model that best fits your market
2. Validate product-market fit before adding complexity
3. Monitor key metrics like transaction volume, take rate, and platform leakage
4. Add complementary revenue streams as you scale (e.g., add advertising to commission model)
5. Iterate based on user feedback and financial performance

Example: Etsy started with just listing fees, then added transaction commissions, and later introduced premium seller services like Etsy Ads and payment processing for additional revenue.

Your Situation	Recommended Primary Model	Why
Facilitating standard transactions online	Commission	Aligns incentives, scales with volume, perceived as fair
High transaction values ($10K+)	Subscription or Lead Fee	Percentage fees become too expensive
Complex invoicing/offline payments	Subscription or Listing Fee	Can’t easily facilitate transactions
Building initial user base	Freemium or Free Listings	Removes friction for early adopters
Strong network effects and exclusivity	Membership Fee	Users pay for access to valuable network
High-value B2B services	Lead Fee	Businesses willing to pay for quality leads
Established platform with traffic	Add Advertising/Featured Listings	Monetize existing traffic without impacting transactions

Decision Matrix: Which Revenue Model Fits Your Marketplace?

Key Takeaways

In a nutshell, there are seven core online marketplace revenue models for selling products. Every model has its pros and challenges.

The commission model remains the gold standard for most marketplaces because it:

• Creates minimal friction for users (pay only when you get value)
• Scales automatically with transaction volume
• Aligns the platform’s success with user success

However, there are legitimate cases where alternative models work better. The key is to deeply understand your market, start with the model that best fits your initial situation, and be prepared to evolve as you grow.

There is no necessity to limit yourself to a particular marketplace business model. The major companies on the market successfully combine two or even more monetization strategies, like Amazon or Etsy. 

Sloboda Studio has some major experience in building and helping online marketplaces come to life. Just drop us a line for a free 30-minute consultation.