Tiered fees - A growth-friendly monetization model for two-sided marketplaces

How a marketplace platform can serve a long tail of shops for free and make money on just the shops that make money.

Any new digital platform wants user growth. Free can be key in attracting and growing new users to an unknown platform. And for a new user trying a new platform, or for someone who’s in the business of trying to sell something and building a business on their own for the first time, free could mean everything. But how would a platform ever start making money if everything is for free? The answer, in a perfect world, is obvious. Let just the ones who can afford to pay, pay, and keep everything free for the rest. Then you can grow with people testing your platform without taking any risks, and when they have grown into viable business on their own, you can start charging them.

But how do you know, who can afford to pay and when? And how do you preserve fairness and transparency for all involved?

Two-sided marketplaces

A two-sided marketplace consists of shops who utilize the platform to get revenue from their customers. The platform can charge the shops for using the platform a fixed fee to enter or a license fee on a subscription basis. Subscription currently seems to be the favored model for most platforms.