Would you like to show the whole idea of your business on just one page? Or to visualize the whole project in one picture?
The solution is creating a business model canvas.
The business model canvas allows us to gather and break down all the key business points in one table. It allows visualizing all the project blocks, including customers, customers…
The Business Model Canvas idea is great in its simplicity. You no longer need to present huge business plans to your partners or investors. There is anything excessive in the business canvas. It covers all the essential business segments. Surely, if you make it right. We will share the key steps of the Business Model Canvas for the Online Marketplace.
What is the Business Model Canvas?
Business Model Canvas is a graphical representation of the basis of your business. This concept was developed by Swiss business strategist, Alexander Osterwalder, and information systems management professor, Yves Pigneur. They defined the main blocks that serve as a basis for any organization:
- business structure
- value proposition
- relationships with clients
Generally, this template is used when creating a new business. All the main points of the business can be presented in a simple and logical spreadsheet. Later these materials can be used for meetings with potential investors and partners. They will definitely appreciate the precise and logical presentation of your idea.
However, the Business Model Canvas can be used not only by startups. Mature businesses can use it, too. Does the organization not have platform business canvas? It’s high time they got it and filled it out! It will help to find out the strong and weak points of the business. Also, it is easier to highlight possible gaps in the processes.
Business Model Canvas vs Business Plan
At a glance, it is easy to confuse these concepts.
But in fact, business canvas and business plans have completely different formats, purposes, and ways of developing and presenting them to potential partners.
A model is a brief presentation of your business structure. It does not contain any information about the strategy of the business idea realization. It also does not contain any figures and calculations reflecting the plan of business development.
Key advantages of the business model canvas:
- Visualization. Business canvas helps to represent the idea of your future project within a few words.
- Good for quick communication. Business model canvas briefly explains a business idea for your partners and investors.
- Is laconic. Any business model canvas can’t contain too many details. Otherwise, it succinctly describes all the key features without diving in details too deeply.
However, a business plan is an extensive strategic document. It describes the way of developing future business. It contains a market analysis, the steps of attracting investments, expenses calculations, and revenue. And much more information.
Key advantages of a business plan:
- It is more detailed. The business plan relies on numbers and describes a project with much detail.
- Describes your business goals. A business plan shows how you’re gonna build the product.
- Sets priorities. Here you can not talk about your future features, tech stack, and tasks. But choose which one you need to develop first.
Both of these documents are important and are not interchangeable in any way. However, you should remember is that the business plan is based on the business model. And its development is started only when the business model is validated and approved.
The structure of the Business Model Canvas for Online Marketplace
So, how to make a business model canvas? The first thing to consider when establishing a new company is its internal structure. The processes of conducting the business and the resources for its establishment. Additionally, no business can exist without partnerships with external organizations. This aspect should also be considered when creating a business model.
The ways of managing the company’s workflow.
Here you describe the most important active assets of your business model. The key assets are:
- Material resources – physical objects such as production assets, buildings, equipment, transport, etc.
- Intellectual resources. Trademarks, information protected by property rights, patents, databases of partners and clients, etc.
- Human resources. A crucial factor for every business. Yet some types of startups, like science-based or creative ones, require particular attention to HR.
- Finance. Financial resources or financial assurance such as money assets, credit money, or reserves.
Organizations establish partnerships. It’s needed to optimize their business models, minimize risks, or get resources. These relationships become the basis for lots of business models. There are several types of partnership:
- Strategic collaboration between non-competition organizations.
- Co-competition (a strategic partnership between competitors).
- Joint venture companies for launching new business projects.
- Relationship of the producer with the supplier to ensure getting components of the necessary quality.
This block describes the way the company is going to achieve the business purpose. This can be done in several ways:
- Research & development. Is it a completely new product? So the company should conduct market research. So they know whether it is necessary for the clients. And develop it according to their suggestions.
- Quality check. The company should constantly control and ensure the perfect quality of the product.
- Marketing & advertising. Even the best product needs to be promoted and advertised. So the audience knows about it.
The value proposition is the complex of advantages that the company can offer its clients. Let’s look at some of the advantages of the value proposition:
- Novelty. Some value propositions are oriented on satisfying completely new needs. Especially even they have never existed on the market before.
- Productivity. Increasing the efficiency of the client’s business or performance of the product is traditionally used for creating the value proposition.
- Custom manufacture. The merchandise and services satisfying the individual requirements of the clients are of high value.
- Do one’s work – the value proposition may offer the clients help in doing their job.
- Price. Offering the existing advantages for a lower price is one of the most popular strategies for fulfilling price-sensitive requirements.
- Cost reduction – offering the clients help in reducing their own expenses.
- Risk mitigation – the clients will appreciate lowering the risks when buying the products or services.
- Availability. Making the goods or services available for those clients who did not previously have access to them.
- Convenience – simplicity, and user-friendliness of the merchandise can be a value proposition as well.
Which customer groups the company is going to attract and satisfy their needs? You need to classify them according to their needs, behavior, and other features. In other words, to define the target audience. Why is this necessary?
The target audience
- The difference in their demand determines the difference in your offer to each group.
- Interaction is handled via different channels.
- A way of establishing relationships will also be different.
- Different groups of clients can bring different profits.
- They are attracted by different aspects of your offer.
How will you sell your product?
Interaction with the clients
This is about the company’s way of communicating with the different target audiences. And bringing the value proposition to them. The channels of communication, distribution, selling. They compose the system of the company’s interaction with the clients.
Relationship with customers
This block defines the way of company-client interaction and client support by the company.
- Personal support – the client communicates directly with the company representative before and after the purchase.
- Special personal support – a particular client has a personal manager that is assigned to them.
- Self-service. The company does not communicate directly with the client. But it provides all the necessary tools to deal with everything on their own.
- Automated service. A combination of the more advanced form of self-service with the automation of the processes.
- Communities – many companies create and support online communities that allow users to exchange their knowledge. They help to understand the needs of the customers better.
- Collaborative creation. Some companies do not build traditional buyer-seller relationships. And instead, create a product in collaboration with the client (allowing them to participate in creating the design or content).
This block describes the two major money flows of the company. The expenses for maintaining the business and the revenue from selling the value proposition.
Creating a business model? Here you should include all the possible expense items for establishing and maintaining your business. For example:
- Organizational costs (establishing the company as a legal entity).
- Human resources (salaries for the employees of the company).
- Office (cost of the rental, maintenance, buying the equipment, etc.).
- An online platform. Especially if your company handles business via the Internet. It is a must to have a website or an application. Here you include the work of developers, PMs, administrators, maintenance of hardware, etc.
- Marketing & advertising.
The earnings of the company that covers the expenses and brings profit to the owners.
- Earnings from selling a value proposition. These are revenue from selling physical goods, commission. Also, earnings from selling subscriptions or premium services, etc.
- Advertising (earnings from posting the advertisements on the online platform).
- Brand usage. If your company is already a widely recognizable brand with a registered trademark, you can charge other organizations to use the brand.
Example Of a Business Model Canvas of TOP 4 Online Marketplaces
Airbnb business model canvas
How to understand how to apply the canvas for developing the marketplace business model? Let’s analyze Airbnb – one of the top marketplaces in the world. We are taking into account the success and worldwide recognition of the platform. And we believe it is a good example to follow.
Airbnb online marketplace business model canvas
The infrastructure of Airbnb is represented by the partners and resources of the company. They should establish a partner relationship with different businesses, travel, and legal authorities. To provide the best user experience for the hosts, they use different companies’ services. Also, they apply the digital instruments of third-party providers. Let’s look at the partnership network and the resources of Airbnb more closely:
Key partners – partnership is essential for the development of the business.
- Hosts – the suppliers of the marketplace whose property brings Airbnb part of the revenue.
- Investors – the people whose money helps Airbnb to support and develop the business.
- Lobbyists. The laws of the different countries may impose legal and financial restrictions on renting one’s property on a commercial basis. That is why Airbnb needs support at a governmental level.
- Business travel partners. Airbnb expands its potential audience. It collaborates with platforms engaged in the organization of business trips. These are platform like Concur, Triplink, and others. Therefore, the Airbnb apartments appear among the variants of accommodation for business travelers. You can learn more here.
Other partners. A partnership is used in order to improve the quality of the service. And to provide a better user experience.
- Photographers. The research demonstrated that places with attractive professionally made photos get more bookings than the ones with amateur pictures. That is why Airbnb hires photographers in order to take pictures of the properties. This service is free for hosts, so the company has to cover the expenses.
- Integrations. To improve the functionality of the platform, Airbnb uses third-party tools. These are integrations with Google maps, cloud storage, identification services, etc.
- Insurance. The marketplace provides insurance for the hosts’ property for the deals confirmed via the marketplace.
- Listings – the major resource of Airbnb that brings the actual revenue.
- Technical resources. These are used for the maintenance of the online platform. It includes resources like platform architecture, machine learning algorithms, analytic tools, hardware, etc.
- Brand. Airbnb is a famous and reputable company. Its brand has financial value and acts as a trust factor for the clients and partners.
Airbnb has developed a stunning idea for short-term rental; however, they would never have become so successful without their activities for attracting users:
- Providing a positive user experience by making the transactions smooth and easy.
- Growing the community (adding new participants, extending to new cities, etc.).
- Keeping the travelers returning by providing an exciting experience and lots of events.
- Extending the value proposition (event hosting, Airbnb-plus apartments, etc.).
Airbnb’s clients trust them with their property and their money. And the marketplace can offer value for them. Let’s consider the value proposition of Airbnb in more detail:
- Additional income from their property
- Fast and simple transactions
- Meeting people from different countries
- The host may choose to accept only verified guests
- Extensive options for calendar and booking management
- Transparent ratings of guests
- Lower cost than hotels
- More variety of apartments
- Fast and simple transactions
- Local experiences during the trip, meeting new people
- Transparent ratings of hosts
No business can exist without defining a target audience. In order to develop a better offer for each group of customers, the business owners and marketers usually split the audience into segments. Let’s see what types of customers use Airbnb’s service.
- By type of accommodation: entire apartment, private room, shared room
- By location: countryside, city
- travel type: business and leisure travelers
- demographic: families with children, couples, retired people
- income: looking for low-cost or premium accommodation
- Sales channels
- Digital advertising campaigns
- Content marketing (newsroom, guidebooks)
- Social media
- Free advertisement in travel blogs
Before developing each business, decide how the company will maintain relationships with their customers. Airbnb appears to be using a combined type of customer support. It includes self-service for routine issues and personal support for extraordinary ones. Let’s take a closer look at Airbnb’s interactions with customers.
- Additional opportunities for getting new income (short periods between guests, premium listings on top)
- Support in case of any issues (accidents, damage, and other complaints)
- Support during all guest stays
- Orientation on host success
- Additional benefits for super hosts
- Deal with all issues in a timely manner
- Manage the risks of both parties
- Secure and transparent storage of personal data
We cannot even imagine the monetary turnover of a company that is worth about $31 billion dollars. So we can give only a minor part of the possible expenses of Airbnb. Their revenue streams seem to be simpler since we know the monetization model they use.
However, a worldwide recognizable brand is also likely to bring huge revenues to the company. And for this, we cannot calculate even approximate figures.
- Development and maintenance of the platform (work of developers, office, hardware)
- Staff salaries (developers, non-technical staff, support specialists, photographers)
- Maintenance of offices
- Cost for transactions (using the services of payment providers)
- Legal issues (lobbying, legal proceedings if any)
- Customer support (office and salaries of support specialists)
- Cooperation with partners (travel platforms, insurance companies)
- Marketing & Advertising
- Transaction fees from both parties:
- Hosts – 3-5% from rental hosts, 20% from event hosts
- Guests – 5-15% from rental guests, no fee from event guests
- Premium services. The owners of VIP apartments pay a $149 fee for company representatives. So it is possible to check the apartment and to award the category of an Airbnb-plus apartment.
- Brand value – the revenues from using the brand, advertising, partnerships, etc.
Uber business model canvas
Uber business model canvas
Uber infrastructure is mostly represented by drivers, customers, investors, and lobbyists. In order to make Uber a good marketplace and to raise funding, it is not enough to work with drivers.
Uber emphasizes that they aren’t just a taxi. That’s why Uber’s infrastructure also includes lobbyists. Lobbyists establish more trust among new customers. Also, Uber promotes its service in the media and launches new services such as UberEats.
Uber also partners with various software providers. These are GPS systems, payment providers, or cloud storage. Key Uber activities are transfers, scaling drivers’ free and busy time, promotion, and expanding worldwide.
Drivers are the most valuable Uber suppliers. These are the partners who can provide Uber with great customer propositions. For example, lower costs and timely pick-ups. Moreover, Uber can cut more expenses as far as drivers join with their personal cars.
Investors or venture capitalists, logically, can provide the funding to support Uber. More funding helps to develop functionality, algorithms, driverless cars, apps.
It may not look so at first sight, but lobbyists are important for Uber. As the company is on its development stage, it can enter new cities and countries. So it probably will experience some resistance. For example, from local taxis and taxi services. And even from the customers who aren’t familiar with Uber yet. To establish more trust among potential customers, Uber has lobbyists helping reduce resistance.
These are the partners who are also very important for the company. But they aren’t always playing starring roles. For Uber, other partners are technology and infrastructure providers. These are services like Maps, GPS, Payment providers, Cloud storage. Financing partners or banks or insurances are also included.
- Scaling drivers so that they do get idle hours
- Scaling customers so that they do not have to wait for drivers
- Stimulate new participants to join and use Uber
- Expand to countries worldwide
The key resource of the Uber platform is its users’ interaction. Here we can talk about the interactions between key participants: drivers and passengers.
However, there are many more specialists. They work to make these interactions more clear and efficient. At this point, we can talk about; engineers, staff that work with analytics, data, platform architecture, and algorithms.
People who work with branding and funding are also included.
The value proposition for the customers:
- An ability get where they want to within one click
- An ability to use the service 24/7
- Cashless transactions
- Feedback system
- An ability to track a driver and know the exact time of arriving.
The value proposition for the drivers:
- An opportunity to earn money
- An ability to choose their working hours
- Easy career starts
At first sight, it seems Uber considers the relationship just between customers and drivers. But looking closely we can see that there are many more people involved.
In addition to the customers and drivers, Uber communicates with:
- the broader public. It is done n order to create positive branding and attract new customers and drivers
- the regulators – to lower restrictions and avoid bans
Uber’s cost structure mostly depends on customer acquisition costs, with the key elements that are:
- New features development
- Upgrading the existing system
- Transaction fees
- Staff salaries
- Expansion to new destinations
- Infrastructure costs
- Computing power costs
- Customer support
- New niches expansion like UberEATS
Amazon business model canvas
Amazon business model canvas
Amazon is the biggest American conglomerate that focuses on e-commerce. Moreover, Amazon also provides customers with cloud computing, digital streaming, and artificial intelligence services. Here we are talking about Amazon’s marketplace part. We should mention that the key partners here are buyers and sellers. The core resources are warehouses to store the products and logistics systems. We can also include software engineers who support the e-commerce platform.
Key Partners of Amazon
The key amazon partners are both buyers and sellers. The users that have a Prime Amazon subscription are also the service’s supporters and contributors. However, there are other partners such as authors, publishers, and logistic partners. Together with the sellers, all these people are increasing Amazon’s value. Also, they attract new customers to the service.
Being an online marketplace, Amazon has a part of its key resources offline. These are fulfillment centers or warehouses. Moreover, Amazon created an automated supply chain to make it easier to deliver the goods. Another key resource of Amazon is its software engineers. They develop the infrastructure of the online platform.
Amazon’s value proposition mostly consists of competitive prices, great goods selection, and fast delivery. Amazon is well-known as a platform that provides its customers with safe service, reliable stocks, and fast delivery.
The greatest channel of Amazon is its website. As a second channel, we can name mobile apps. And affiliates like the Amazon Affiliate Program.
Amazon makes their service convenient to use. It allows customers to leave feedback and create product reviews. So others can meet their experiences.
- Selling goods, both digital and physical
- Managing supply chain
- Supporting Amazon ecosystem by acquiring the other ventures
- Website and app upgrades, including development, design, and optimization
Amazon Prime (premium version of the service) is one of the biggest of Amazon’s revenues. It generates revenue from real customers. Besides Amazon Prime, the service gets revenue from commissions and transaction fees.
Upwork business model canvas
Upwork business model canvas
The infrastructure of Upwork represents a simple idea of collaboration between clients and freelancers. Upwork also allows small agencies and companies to join the collaboration. The key activities include upgrading portfolios and searching for job opportunities (for freelancers). And looking for freelancers or agencies (for clients).
The key partners of Upwork are companies that post job offers. Also, freelancers who accept these offers and perform the tasks are partners, too.
The key Upwork activities include job posting (for clients) and job searching (for freelancers). Moreover, each participant can perform different actions:
- Companies use a search tool to look for appropriate freelancers or agencies. It is possible to filter the search results, too. Or they can post a job offer freelancers can apply to.
- Freelancers can upgrade their profiles and portfolios. Therefore, they can show potential clients their qualifications and experience.
After the client finds a freelancer, the freelancer does the work for a client and gets paid.
Upwork’s value proposition is connecting freelancers and businesses worldwide. Each of the participants can get their revenue. Clients are getting the work made for them by freelancers. While freelancers are getting paid for performed tasks.
The platform is a key resource of Upwork. Here clients meet the freelancers and decide whether they would like to collaborate.
- Registered freelancers & clients
Upwork charges a fee from its customers. The service charges its customers in accordance with the time they spend working with their clients. As noted on the Upwork website, the services charge:
- 20% of the fee for the first $500 billed with the client
- 10% of the fee for a lifetime billings between $500 and $10,000
- 5% for collaborations that exceed $10,000
The platform guarantees the safety of all the data of the business and freelancers. This guarantee includes the safety and security of user accounts and payment information of both parties.
The Upwork platform mostly gets its revenue from the customer’s fees.
Tips on creating an online marketplace business model canvas
We have provided you with lots of useful information. Now you know about creating an e-commerce business model canvas for an online marketplace. However, it can be difficult to take it all in at once.
But let’s face it. The most difficult part of any project is deciding what to start with. Here are some practical tips on creating a business model canvas for your online marketplace.
1. Before you start
Hopefully, before deciding to start your own business, you have conducted thorough market research. It is needed to learn your major competitors and study their business.
We suggest that you start by analyzing the business models of your competitors. You can even create a model describing their business as we made Airbnb’s. This will help you not only to understand their business. It will also give you experience in working with the business model canvas.
Thus we recommend you study the models of competitors and pick the most successful ideas. Some of them can be implemented in your business.
The best way to work on developing a business model is to brainstorm in a small team. So, to start to design your canvas, you will need:
- A team of 3-5 people
- Printed or drawn canvas template on a big sheet of paper
- Lots of sticky notes and markers
- About 45-60 minutes
While discussing the business model, don’t forget that it should contain only the basic and most general points of your business. Leave details and strategic planning for later steps. We also recommend you make the process as logical as you can:
- Connect the blocks: each point of the value proposition with the corresponding customer segment
- If some ideas refer to the current aspects of the business. Keep them separate to avoid mixing them up
- If different ideas refer to different departments, keep them separate as well
These simple actions will help you to make the business model more logical and structured. It will save you time in the future.
We recommend doing this step a few days after the brainstorming. So you will have a fresh and unprejudiced view of the results of your work. Evaluate the model according to the following criteria:
- Is it easy for customers to use your product? Or will they find a cheaper/more convenient alternative?
- Is your model scalable?
- Will it produce repetitive revenue?
- Will you earn some money before you spend it?
- Is your business model protected from the competition?
We recommend that each team member evaluates the business model on a 1-10 scale. So justifying their point of view. Your initial model will most likely be changed a lot of times. In the end, it will become polished and viable.
Our Expertise in Online Marketplace Development
TikkTalk is a Norwegian marketplace that allows interpreters to communicate using video and phone conferences. When we met our client he had only a project idea. So our main goal was to turn it into an MVP
Today, TikkTalk is a finished marketplace that provides customers with online translation services.
SalesFolk is a managed service marketplace for copywriters. It specializes in the writing of outbound email templates for sales purposes. The marketplace platform matches customers with freelance copywriters.
The client’s goal was to make the marketplace application convenient for users. It was needed to implement necessary market-required features. had an MVP already, but they needed our help to enable new features for both client and writer.
We improved the platform with extended features., such as registration fee, suitable candidate search, proofreading, and personal information safety
We have improved the initial MVP and created a dashboard panel for different user roles. Over time, we have fully developed the platform concept. We also suggested features that will solve platform problems that may occur.
Above you have read a guide on creating a business model canvas for your marketplace. Let’s have a quick look at the structure of business canvas once again:
- Infrastructure is about setting the structure of your future business. This block consists of describing the working processes. As well as the existing resources and external partnerships.
- A value proposition is the set of advantages your product can offer to customers.
- The target audience should also be described in the business models. It is better to split it into different segments. So you can describe the value proposition for each group.
- Relationship with clients describes the way your company will curate and support your customers.
- Finance is a particularly important block. It describes the expenses necessary for business management. It also tells about the revenues the company will have from selling the product.
To make everything more clear for you, we have laid out a marketplace business model canvas of world top marketplaces Airbnb, Uber, Amazon, and Upwork.
Sloboda Studio has been developing online marketplaces for almost 10 years. We helped our clients to raise more than $20 million of investments.
Need help with developing or creating a canvas of your marketplace? You are welcome to contact us for a consultation.