The Marketplace Monetization Map: Complexity and Asymmetry

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.

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.

Classpass attempts to match consumers with open spots in fitness classes. The scarcest resource in this marketplace is the availability of open spots, not the availability of demand. Since supply is much more valuable than demand, it becomes easy to charge demand for access.

Uber is the quintessential example of a marketplace with low transaction complexity and asymmetry. Matching demand and supply is simply a function of availability and pickup time — commissions are the obvious fit here. On the other hand, marketplaces like Classpass and Scoutbee avoid commissions entirely.

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.

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.

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.

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.

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