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Raking It In
Hi 👋 — Companies like Booking.com and Etsy earn a fee for connecting buyers and sellers. This post looks at take rates, pricing strategy, and the tools marketplaces use to increase them. Thanks for reading.
Take Rates 101
Gross merchandise volume (GMV) is the lifeblood of a marketplace. It measures transaction value and is a key metric for operators and investors. For example, Airbnb’s GMV is the number of nights booked times the average price per night. To grow GMV, Airbnb needs some combination of higher volumes (nights booked) and higher prices (average daily rate).
Marketplaces aggregate supply and demand and sell transactions. For their matchmaking services, they take a cut of every transaction. This is known as a take rate (or commission, or vig, or rake). Take rates range from 10% to 30%. They’re influenced by factors like buyer and seller concentration, exclusive supply, and the availability of alternatives. For example, there are a handful of major airlines in the US. This gives them leverage against OTAs like Booking.com, Kayak, and Expedia, resulting in low take rates for air travel (about 2–3%). In contrast, hotel supply is fragmented, so hotel take rates are higher than flights (about 10–20%). Similarly, chains like Hilton and Marriott have more sway, and are able to negotiate better rates versus independent and boutique hotels, so they get a lower take.
