Marketplace
A business that connects buyers and sellers and earns money from the transactions between them, without owning the goods or services sold.
Definition
A marketplace is a platform with at least two distinct sides, typically supply and demand, that need each other to get value. The marketplace handles discovery, trust, and payment, and usually earns a percentage of each transaction called the take rate. Because each new seller makes the platform more useful to buyers and vice versa, successful marketplaces benefit from strong network effects.
Key Marketplace Metrics
GMV (Gross Merchandise Value)
Total value of everything transacted through the platform
Take Rate
The share of GMV the marketplace keeps as revenue
Liquidity
How reliably a buyer finds a seller, and a seller finds a buyer, in a reasonable time
Repeat Rate
Share of users who transact again, a sign the platform is habit forming
Challenges Investors Probe
- Chicken and Egg: Which side did you seed first, and how
- Disintermediation: Can buyers and sellers cut you out once they meet
- Local vs Global: Whether liquidity must be rebuilt city by city or scales globally
- Take Rate Pressure: Whether competition will force fees down over time
- Revenue vs GMV: Investors value net revenue, so be clear which one you are reporting
- Quality Control: How you keep trust high as supply grows
Real-World Example
Etsy: A marketplace for handmade and vintage goods
Etsy owns no inventory. It connects millions of independent sellers with buyers, handles search and payments, and earns listing fees plus a percentage of each sale. Its pitch to investors has always rested on GMV growth, take rate, and the loyalty of both sellers and repeat buyers.