business model definition

In the most recent economic downturn, it got increasingly difficult to find a job with steady income. Since then, offering micro jobs became an effective alternative. In such context, Fiverr, first launched in 2010, has successfully grown to be the world’s leading online marketplace for small services. To join this full-of-opportunities market, it’s important that you have a big picture of this type of marketplace. This article will give a business model definition, outline different models and discuss which one is right for your micro job marketplace.

Micro freelancing – A potential online marketplace

Marketplace is an exchange platform where values are created by initiating exchanges between buyers and sellers. The typical character of a marketplace is that “It takes two to tango”. Both sides of providers (also called sellers) and consumers (buyers) have to be brought to the platform to trigger the exchanges. Transactions are only carried out when there are buyers who need things done and sellers who are willing to do such things. You can be one among millions of sellers offering what you’re good at and make profit out of it. Or you can go beyond, creating a marketplace for value exchanges between buyers and sellers.

The invention of Internet has forever changed the conventional method of trading. With marketplace built on technology, boundary is broken, and transactions between two ends of the planet have never been that fast and easy. Among different types of online service marketplace, micro freelancing has strongly emerged as a new attractive working trend over the last decade. The knowledge of different business models helps you determine the most sustainable one for your platform development. 

1. Commission fee

You will charge a portion over total fee of every transaction. The commission can be percentage or a flat fee. This is by far the most popular marketplace business model.

Pros:

  • Users only get to pay when they have received value from the transaction. Hence, this method is beneficial in attracting a great number of users on board.
  • Commission fee model enables you to make a piece of profits over all transactions on site. Especially when your site reaches a growth rate towards the critical mass, you wouldn’t miss out any buy & sell activities.

Cons:

  • The challenge is to determine the pricing level, which is the total cost charged. How big should it be? Is it as percentage or a flat fee? Should you make it small at first and increase later?
  • Next is the pricing structure. How will you allocate the cost between buyers and sellers? Should it be an equal amount for both? Or will you charge one side less to encourage them to join?

2. Membership fee

Membership fee is a transaction-insensitive business model. Users are required to pay a fixed fee to be a member and access your micro job marketplace website.

Pros:

  • Users have to pay the fee before getting any value from your site, which means they join with serious intention. This is good in reducing spammers, and bringing about better user quality.
  • This is a good choice for sites providing high valued goods and services in which customers engage in careful research before proceeding to payment.

Cons:

While micro job website is where users buy & sell micro, small-valued, and not too complex jobs. As a result, applying membership fee will induce following drawbacks:

  • It will create an entry barrier discouraging users to join.
  • You would enjoy less profit with membership fee than with commission fee. With micro jobs costing not too high, the volume of transactions would be bigger. And the fact of charging a fixed fee will cause you to miss out the chance to earn even more.

3. Service listings

Another business model for your micro job website is to charge per job listing. Sellers will pay to post jobs on your site. You can also charge buyers when they want to post a custom order.

Pros:

  • For sellers: Posting many jobs increases chance of being seen by buyers.
  • For buyers: In case buyers browse through the job listings but still have not found a suitable service, they can buy custom requests which help them get match with a relevant seller and get the right things done.

Cons:

This should not be used as the main business model, but sold at an affordable amount as an add-on.

  • Many job listings do not guarantee more orders, more sales for sellers. Similarly, custom orders do not assure that sellers will satisfy buyers’ needs. Too high listing fee will discourage users from making many listings.
  • On the other hand, this model is only effective when your site has a huge volume of listings everyday.

4. Featured listings

This business model is somehow similar to service listings, in which users pay to list their jobs. The difference of this model is that featured listings appear at easy-to-be-noticed positions such as in the homepage, at the top of the category.

Pros:

  • Likewise, this is used to increase the visibility to the jobs.

Cons:

  • Featured listings just prove effective when there are a very large number of listings on site, which makes users feel the need of featuring their listings to compete with other sellers. Only when there’s a high demand from users will you earn much from this model.

5. Advertisements

The last model is a typical one for almost every website that you may be familiar with. It is offering advertising spaces such as banner ads, text ads, videos, etc.

Since this is a good source of income, be careful with the positions where ads are shown. If possible, you should only allow ads that are relevant to contents on site to make it less annoying. Of course, customers are always happier without ads.  

Build a sustainable business model

business model definition

To build a sustainable business model, it is crucial to solve “chicken and egg” problem to bring enough users from both sides to your marketplace. To do this, your website should make it easy for all users to join and be part of it. In addition, for a micro job site, the number of transactions is big while the value per transaction is quite small.

Having said that, my advice for an effective business model is to go with the Commission fee. All sides can make value out if it. It helps you own all transactions, and brings multiple benefits to both buyers and sellers.

When your marketplace grows further, it is reasonable to consider and implement other sub models, such as service listings, featured listings, and ads, to control and capture everything happening on your website.

4 Comments
  • abdessalam
    May  24TH,  2016

    Thanks for your article, its really helpful. id like to launch a website with microjobs theme but i don’t know what business model to follow.
    My question is, what is the best business model that can work with microjobs? How to do it ? a tutorial will be the best.
    Id like to use Paypal.
    If i want to choose the 1. Commission fee, the actual version of the theme can work for me with paypal as payments ??? Can you help me guys to install the plateform ?
    We need more articles like this for every theme, its needed for Freelanceengine also.

    • My Dang
      May  26TH,  2016

      Thanks for your interest.
      The most effective and popular model by far is the Commission fee. Big names like Fiverr, TaskRabbit, eBay,… also use Commissions as their main business model.
      A simple illustration of how it works is: Buyer makes an order from a Seller on your marketplace. Then the Buyer sends the payment to you. After Seller finishes the order, you will transfer the fee to the Seller, but retains an amount as the commission fee charged for the successful transaction. This is a win-win strategy, buyer gets what he wants, seller receives money for his work, you earn the commission for helping buyer and seller find each other.
      One of the theme that applies Commissions model working with PayPal is MicrojobEngine We also offer Installation service that helps you install the theme.
      Keep following us for more updated news. Thank you! 🙂

      • abdessalam
        May  29TH,  2016

        Thanks a lot, how much to setup a website, i can install with demo, i am looking to setup everything, commission things with paypal, I am outside usa, so this model can work for me ? How much it can cost me to setup such a website?

        • My Dang
          May  31ST,  2016

          Hi,
          Thanks for your interest in MicrojobEngine. Would you mind sending us an email at contact@enginethemes.com telling your concerns so that our support team could consult you better?
          Regards,

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