Suppose you’ve built an online marketplace, congratulations! You’re one step away from owning your own lucrative business. But building a marketplace is only a part of the equation. Now, you must find out how to monetize your marketplace.

With 2.14 billion people shopping online across eCommerce stores and online marketplaces, you must make the most of this booming market; else, what’s the point of owning a marketplace? 

There are various ways to go about monetizing your marketplace. Although, this will significantly depend on the business model you’ve adopted. For instance, you could make decent money through commissions by running an Airbnb-esque model, where buyers directly pay the marketplace. 

However, collecting commissions might not work if yours is structured like the Facebook marketplace. 

Not to worry. I’ll be highlighting six monetization strategies to adopt for your online marketplace. Read on.

Commissions

Using commissions as a revenue-earning model is commonplace, not just for online marketplaces but also many business models. 

Here, the marketplace — which is you — earns a commission by offering value as a middleman. 

The amount you make from every transaction can vary between one percent to above 50 percent. Although for this revenue model, this amount typically depends on the value you offer to users and how much the item is sold.

This revenue model is arguably the most uncomplicated strategy to make money off your marketplace. But it’ll be challenging to establish a fixed fee for all products. To make the most of this model, you must be dynamic. You can create a fee structure that accommodates the different needs of providers in your marketplace.

For instance, Shutterstock, a digital photo marketplace, offers contributors 15 percent to 40 percent of every licensed photo. That means their commission take rate is anything between 60 percent to 85 percent. 

Although to be fair, they only take as much as 40 percent when users sell above 25,000 photos. 

Shutterstock takes a high commission because of the value they offer contributors. Since there are practically no additional costs accrued to the seller (like listing fees) to make a sale, any further sale is a win. 

So you can say, Shutterstock’s revenue model depends on their cost of providing a win-win service to marketplace users. In this case, if there are no downloads, then there’ll be no earnings.

But comparing this model to many crypto marketplaces like the Paxful P2P, the commission revenue model takes a slightly different turn. Here, sellers and buyers exchange money directly and not with the marketplace. 

However, Paxful stands in as escrow and takes a fee of $0 – $20 from the sender or seller only.

From the viewpoint of a seller or supplier, the commission monetization model is a win-win value proposition since they only pay when they make a sale. However, as an online marketplace owner, you should only leverage this model when users exchange money directly on your platform. 

Preferably, stick to this model if your marketplace users sell digital products like photos or less complex products like handmade goods. 

Fees for Selling

Another common monetization technique for online markets is collecting selling fees. Each transaction gives you a tiny share of the money, much like the commission model. However, the only difference is that you earn a portion of the sale before paying the vendor.

Poshmark has a simple selling fees structure. They charge a flat fee of $2.95 for orders under $15, and a 20 percent commission off orders, $15 and above. While this strategy doesn’t earn you much in the early stages, it accumulates and becomes a passive income stream when your website begins to sell a high quantity of items regularly. 

Premium Listings Fees

Another good strategy to make money from your marketplace is to charge sellers for premium listings on your site. Users pay a listing fee to be visible on marketplaces like Etsy, Binance P2P, and eBay, which allows them to conduct deals independently.

But in comparison to the primary listings, a user’s ad on a premium listing would be given a prominent location on your website such as;

• Above other listings on your homepage
• In a specific and visible category
• Or an advertising panel in a relevant category

This strategic placement makes premium listings all the more noticeable to customers.

There are some ways to spice up the premium listing monetization strategy to make it appealing. For starters, if your marketplace doesn’t require a premium account to list ads, you can offer promotion alongside for a speedy sale. 

However, if it does, you can still help with promotions, showcasing the goods or product’s USP with additional photos, professional copy, or even offering limited middleman services for free. 

Fees for Membership

This is a tricky monetization method as there’s no clearcut side to charge. Should you charge the vendors (sellers), or would you rather the customers (buyers)?

Plus, there’s the challenge of selling them the idea of signing up in the first place.

But here’s the thing. To use this monetization method, you must identify who needs your marketplace services more. 

In other words, where does the demand lie? 

If more vendors are signing up than buyers, charging the vendors might pay you more. However, if the reverse is the case, perhaps going for a freemium customer membership might work. 

But bear in mind that whichever side you choose to charge will require more than the basic buying and selling package. If you’re going for the vendor membership fees, consider a one-off fee for joining the marketplace initially. When that doesn’t work, go for a monthly or bi-annual subscription. 

You could offer discounts on membership fees to attract new vendors as FlexJobs does.

Your plans could differ based on several incentives that make life easier for vendors, such as:

• Deep-dive analytics feature on the dashboard
• Branding and customization options
• Product management
• Promotions on select months
• Automatic e-receipts, and so on.

The same goes for the freemium customer membership fees. While you shouldn’t block free customers from accessing your website, you could limit their accessibility to premium services like accessing premium listings, extra on-app features, or an ad-free service. 

Nevertheless, when there’s a high demand on both the customer and vendor sides, you could charge them both as Shutterstock does. 

But be careful not to overdo this when starting your marketplace. It could be counter-effective. Instead, focus on offering some incentives on whatever membership model you choose.

Advertising

Marketplace advertising is identical to that of premium listings. However, in this monetization model, vendors, or third-party companies offering relevant items and services, pay to publish their ads prominently on your marketplace.

See how Jumia runs ads for popular brands on its website.

Jumia ads are above the fold and use banners, graphics, texts, or a combination of all to stand out from the crowd. However, keep in mind that too many advertisements irritate site visitors, hence using this technique wisely. So, instead of plastering them all over your ecommerce website, stick to placing them in strategic yet visible positions.

Also, keep in mind that this monetization strategy will work best only when you have high traffic coming into your site.

You can also simultaneously run your own ads on the vendors’ and third-party companies’ websites. This is a good way to curate a mutually beneficial partnership. If you’re not sure how to create an ad, try making one using an online poster maker. 

Fees for Lead Generation

The lead fee revenue strategy is not your everyday marketplace monetization model. 

Because of this, it is only suitable for B2C marketplace models where users deal outside of the platform. Unlike other monetization models where money exchanges hands on the platform, users will have to pay to access detailed information on an item or service. 

Usually, B2C marketplaces with this revenue model deal in non-tangible items or services. Excellent examples of marketplaces with such services are recruitment agencies, dating sites, some freelance job sites, handyman services marketplaces, and so on.

Like the subscription model, you can charge both sides, depending on how you structure the market. For instance, Virtual Vocations, a remote job service, charge job seekers a monthly or bi-annual fee to get full access to remote job leads.

Scrolling further down, you’ll notice that their lead generation revenue model has a fee structure — similar to a subscription model — to make it more appealing to job seekers.

So instead of paying per lead, users get an all-you-can-access lead buffet while on subscription.

On the contrary, Rynek Pierwotny, a polish real estate marketplace, charges real estate developers for every qualified lead they get on the platform. Therefore to make the most out of this monetization strategy, identify the side with the most demand, and charge accordingly.

You must consider that this model does not have a “ passive lasting effect” because transactions are done outside. So you must only implement this strategy for users looking for new connections only.

Final Thoughts

When selecting the right monetization approach, you should pay careful attention because it is critical to making money on the platform. Start by examining the market and the competition, then draw up a sustainable and scalable monetization plan based on the strategies outlined in this article.

In summary, starting with a single monetization strategy and making it a priority is always a smart approach. Later, as your organization grows, combine different tactics to determine which income models the best suit your needs.