Questions

There's so many different examples from Airbnb (12% host, 3% to renter), Uber (~15% to driver) to Craigslist (freemium w/ paid placement + posting) for pricing a marketplace. Is there a framework to follow when thinking through this model? Is there different pricing sensitivities per marketplace type (heavily curated vs. more open)?

I think it's difficult to answer this question without more background on the type of marketplace you are trying to develop a pricing model for. If the marketplace involves businesses on one side and consumers on the other, it's standard to charge the businesses and not the consumers (think hiring platforms that charges business to post jobs and don't charge applicants for applying to jobs). If the marketplace involves two different types of consumers (Air BnB) then you might charge something on both sides, so it's important to make that distinction.

That being said, what's most important at first is growth (and balanced growth on both sides of the marketplace). Choose a pricing model that accelerates growth on the "dominant" side of your marketplace. When I say dominant, I mean is there one side of the marketplace that drives growth for the platform as a whole. Going back to my hiring platform example, the employers are the "dominant" side of the marketplace, because if you add more employers (and thus more jobs) to the platform, you gain more opportunities to show to potential applicants, driving candidate volume in turn. So in the hiring world, you would focus your business model on making employers as happy (and as willing to post new jobs) as possible so that you can scale your platform.

I hope this is helpful and if you'd like to chat more let me know!


Answered 3 years ago

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