The Marketplace Monetization Map: Complexity and Asymmetry

Derived products are rarely seen in marketplaces because this data is better used internally to improve matching on commission-based marketplaces or lead generation in paywalled marketplaces. In rare cases, marketplaces targeting complex and opaque markets, like Leaflink, can provide aggregated and anonymized market data as a part of a paid tier.

Derived products leverage network engagement and interactions to generate an asset that can be productized and monetized directly. These usually take the form of market intelligence or aggregated data products.

Transaction complexity: This is a measure of how complex it is for the demand and supply sides to find a “match” on the marketplace and then complete a transaction. This can depend on a range of factors including the nature of supply and the density of supply by region or category. For example, both Upwork and Preply are labor marketplaces with dif... See more

In addition, a paywall creates barriers to entry (and liquidity) on the marketplace. As a result, it is best used when having sufficient demand and supply (liquidity) does not automatically unlock transactions, i.e. marketplaces with very high transaction complexity. In other words, paywalls need both high complexity and high asymmetry.

Commissions (or interaction taxes) are viewed as the “obvious” way to monetize a marketplace.

Docplanner sells a SaaS product to doctors to help them digitize patient records and scheduling. This approach helped it attract a critical mass of doctors (the more valuable side) and allow patients to book appointments on its healthcare marketplace. OpenTable, Treatwell, and Lantum also monetize similar complementary products.

Unlike the other monetization models I have explained so far, a complementary product does not generate revenue from access to or interactions on the marketplace. Instead, it involves selling a standalone product to enhance the marketplace’s value proposition.

Paid advertising can be a tricky monetization model for marketplaces. On one hand, it holds promise as a high margin revenue stream. However, it can also interfere with supply curation.

Paywalls are the primary alternative for startups that cannot monetize with a commission. A paywall charges one side — either supply or demand — for access to the marketplace.

Marketplace monetization depends on two factors — Transaction complexity and the asymmetry in value to the demand and supply sides