Marketplace Value Creation and Capture (PandoDaily)


Creating a liquid and vibrant marketplace is already hard enough; fine tuning a business model, and eventually getting paid for the value that has been created by the marketplace is just as complicated and perilous. There has been a lot of talk on the “take rate” a marketplace business can eventually sustain and justify. In general, there is a direct and positive correlation between the strength of network effects achieved and the take rate that can be sustained, as well as a negative causation between initial take rate and subsequent network effects that can be realized. As a result, it is better to achieve network effects first before trying to optimize for maximum take rate/commission in a marketplace. (Note to VCs: don’t judge the revenue potential of a marketplace business based on its initial take rate.) In fact, at eBay it was common practice to launch a commission/fee free marketplace in a particular geography and wait for liquidity and network effects before imposing any type of fee structure on the business.  Continue at PandoDaily. . . .







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