What is an online marketplace business?
Think of a marketplace business as the evolution of a referral business. You’d own an app or website that makes it easy for “buyers” and “sellers” to meet each other.
Many marketplaces monetize by taking a cut of each transaction or by charging for membership or listings.
Marketplace is one of 19 types of online business and considered a Level 5 online business, according to our framework.
6 Levels and 19 Types of Online Business
Level 1 = Novice
Okay for side income or beer money, but hard to earn a living.
Level 2 = Intermediate
Best for earning a living online when you’re starting out, but hard to scale.
Level 3 = Advanced
Easier to scale and higher income potential, but you usually need significant investment of time and/or money upfront.
Level 4 = Superior
Even more scalable and even higher income potential, but also more complex / difficult / expensive.
Level 5 = Distinguished
Most complex / difficult / expensive, but the rewards here can be massive.
Level X = Wildcard
These are the misfits. Many aren’t even considered businesses in the traditional sense, but they are all ways to make money online. You typically need a lot of time, money, or luck to succeed with anything here.
How can you make money online with a marketplace?
Here are the legit ways I’ve found to make money online with a marketplace business…
Start a Physical Products Marketplace
John Sillings co-founded Art in Res, an online marketplace that connects artists with art buyers…
- Co-founder of Art in Res
- $16,000 Art in Res monthly revenue
Build a Digital Products Marketplace
Joe Magnotti co-founded Empire Flippers, a marketplace for people to buy and sell online businesses (mainly websites)…
- Co-founder of Empire Flippers
- $2.47 million Empire Flippers monthly revenue
Start a Services Marketplace
- Founder of Funnel Rolodex
- $58,000 Funnel Rolodex monthly revenue
Pros and Cons of Marketplace Businesses
- Quite scalable due to network effects: “the value of a product or service increases according to the number of others using it.”
- Strong passive income potential.
- You don’t have to create any content (the users do that).
- Easy to sell once successful.
- Several monetization options.
- Usually requires a complex set of skills.
- Chicken and egg problem in the beginning: buyers won’t use it if there are few sellers, and sellers won’t use it if there are few buyers.
- Quality control issues.
- Very hard to compete with established players (again due to network effects).
Is a marketplace business a good way to earn a living online?
It’s an attractive business model but you’d need to bring your A-game and probably hire some A-players if you want to succeed. Don’t expect to get rich quick or easy.