The post also looks at Homeaway, Grubhub, and Shutterstock, three other marketplaces that have similarly diversified away from transaction revenues to drive growth and profitability.
You have probably guessed where I’m going with this by now. Startup marketplaces should take note and think about how they can build non-transactional revenues in the future. There are two main reasons:
- Non-transactional revenues enables more aggressive pricing for transactions which will grow the market and make it more difficult for competitors
- Seller and buyer services increase switching costs making it more difficult for new entrants (again) and increasing life time value
In the early days – at least the first year or two – the focus should be on driving transactions, which are the lifeblood of any marketplace. After that non-transactional revenues should become part of the focus, particularly if there are any questions over the size of the opportunity.