Year: 2022
Type: book-chapter
Abstract: Sustainability7 Brokerage Model: Scaling with Fees on Marketplaces?Commission fees are considered as the most developed and even sometimes successful model to capture value in marketplaces.Sometimes called "transaction fees", "take rate", or "rake" or "service fees", commissions are capable of minimising frictions in marketplaces.Transaction fees can be adjusted to attract both sides of the marketplace and solve the mutual baiting issues.This mode of value capture presents the advantage of exponential profit growth when scaling, provided variable costs are kept under control.Using AirBnB as a central case throughout this chapter enables us to analyse and illustrate the benefits and challenges associated with this value capture mechanism. Why are Transaction Fees so Developed?An internet transaction is the sale or purchase of goods or services, whether between businesses, households, individuals, governments, and other public or private organisations, conducted over the internet.In 2020, over two billion people purchased goods or services online, and during the same year, e-retail sales surpassed $4.2 trillion worldwide.Those transactions generate fees which may be visible or invisible to the users.This is the case of marketplaces like Airbnb, Amazon, Apple Store, Blablacar, Etsy, Uber, Zalando, and so on.If transaction fees are not the sole way to charge participants and customers, they are among the most dominant pricing mechanisms-namely the type of value capture behind the business model-at work in marketplace configurations.A recent study pointed out 1 that more than 50% of the "100 best performing marketplaces in 2021" take a cut out of the transactions they process.The transactional business model can be considered a taken-for-granted marketplace model whereby two sides (i.e., buyers and sellers) engage in a transaction and thus generate revenue for the marketplace provider.The value is captured by charging one or both sides a service fee, a commission fee, sometimes called a "rake", on each successful transaction.The "rake" analogy is interesting, as it reveals why this pricing tactic spreads among marketplaces.As Bill Gurley explained, "In a casino, the term 'rake' refers to the commission that the house earns for operating a poker game.With each hand, a small percentage of the pot is scraped off by the dealer, which in essence becomes the 'revenue' for the casino".Like a casino, a marketplace provider See ShareTribe insights accessed in May 2022.
Source: De Gruyter eBooks
Language: English
Subfield: Strategy and Management
Domain: Social Sciences
Open Access status: hybrid
OpenAlex ID: W4311653197