Chapter 13. Model Six: Two-Sided Marketplaces

Two-sided marketplaces are a variation on e-commerce sites, but they’re different enough to warrant a separate discussion. If, after reading Chapter 7, you’ve concluded that you’re running this kind of company, here’s what you need to know.

In this model, the company makes money when a buyer and seller come together to complete a transaction. While eBay is undoubtedly the most famous example of a two-sided marketplace, the underlying pattern is fairly common. Consider the following business models, all of which have an aspect of a two-sided market:

  • Real estate listing services allow prospective buyers to identify properties by a wide range of criteria, and then extract a fee for setting up the transaction, either as a one-time cost or a percentage.

  • Indiegogo lets artists list projects and collect the support of backers. Backers are able to browse projects and find those they want to support. The site takes a percentage of monies raised.

  • eBay and Craigslist let sellers list and promote items, and let buyers purchase from them. In the case of Craigslist, a very small number of transactions (rentals in certain cities, for example) cost money, making the rest of the site free.

  • App stores let software developers list their wares in exchange for sharing the revenues. The app store not only handles the catalog of apps and the delivery, it also distributes updates, helps with litigation, and manages currency transactions.

  • Dating sites allow an inventory ...

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