the startups.com platform about startups.comCheck out the new Startups.com - A Comprehensive Startup University
Education
Planning
Mentors
Funding
Customers
Assistants
Clarity
Categories
Business
Sales & Marketing
Funding
Product & Design
Technology
Skills & Management
Industries
Other
Business
Career Advice
Branding
Financial Consulting
Customer Engagement
Strategy
Sectors
Getting Started
Human Resources
Business Development
Legal
Other
Sales & Marketing
Social Media Marketing
Search Engine Optimization
Public Relations
Branding
Publishing
Inbound Marketing
Email Marketing
Copywriting
Growth Strategy
Search Engine Marketing
Sales & Lead Generation
Advertising
Other
Funding
Crowdfunding
Kickstarter
Venture Capital
Finance
Bootstrapping
Nonprofit
Other
Product & Design
Identity
User Experience
Lean Startup
Product Management
Metrics & Analytics
Other
Technology
WordPress
Software Development
Mobile
Ruby
CRM
Innovation
Cloud
Other
Skills & Management
Productivity
Entrepreneurship
Public Speaking
Leadership
Coaching
Other
Industries
SaaS
E-commerce
Education
Real Estate
Restaurant & Retail
Marketplaces
Nonprofit
Other
Dashboard
Browse Search
Answers
Calls
Inbox
Sign Up Log In

Loading...

Share Answer

Menu
Marketplaces: What is the best pricing (business model) to apply to a marketplace?
AK
AK
Anton Koval, Founder with big love for marketplaces answered:

There is a great article about this written by Bill Gurley.
http://abovethecrowd.com/2013/04/18/a-rake-too-far-optimal-platformpricing-strategy/.

Basically price is a friction factor in a marketplace. So you need to balance it in a way that creates less friction (lower prices) and at the same time keep your business profitable.

Basically there are several factors that determine the business model:
- Who pays. Generally the side that gets the most value should be charged, however some platforms split the payments between both sides.
- Marginal costs. If producing a good or service for your supply takes a lot of time or effort it will be hard to charge a high percentage for this. Think Etsy, suppliers need to buy material and craft a product.

At the same time if a product can be easily reproduced or resold, you can charge a higher percentage (e.g. ilustrations, templates, songs, apps). If you add to this a platform with big power percentage can be really high ( Apple appstore: 30%, Shutterstock: 70%. This is also why music creators hate Spotify as you need 336 842 plays to earn US minimum wage.

- Frequency and size of transactions
Typically the frequency and size of transactions are correlated. The larger the size of the transaction the lower the frequency.

Uber, for instance, has a huge frequency however each transaction is small. Airbnb, on the other hand, has a much lower frequency yet the size of the transaction is larger.

- Other revenue streams
You may also lower your transaction cost by implementing additional revenue streams like listing fees in case of Etsy.

- Market Position
Generally the stronger the market position of your marketplace the higher fee you can charge for this. However, this inevitably attracts competition.

Generally, there is no set rule for pricing you need to "figure it our" by experimenting or use a product like Priceintelligently that can help you out.

Talk to Anton Upvote • Share
•••
Share Report

Answer URL

Share Question

  • Share on Twitter
  • Share on LinkedIn
  • Share on Facebook
  • Share on Google+
  • Share by email
About
  • How it Works
  • Success Stories
Experts
  • Become an Expert
  • Find an Expert
Answers
  • Ask a Question
  • Recent Answers
Support
  • Help
  • Terms of Service
Follow

the startups.com platform

Startups Education
Startup Planning
Access Mentors
Secure Funding
Reach Customers
Virtual Assistants

Copyright © 2025 Startups.com. All rights reserved.