Marketplaces are complex beasts. Unlike a simple SaaS or e-commerce shop, you are juggling two distinct customer bases (supply and demand), each with their own needs, churn rates, and acquisition costs. You are matching them in real-time, managing trust, and often holding the money in between.
While common indicators like Monthly Recurring Revenue (MRR) or churn are important, they often paint an incomplete picture for marketplaces. To truly understand the health of your ecosystem, you need to look deeper.
Here are the essential KPIs that every marketplace founder should track, explaining why they matter and how to optimize them.
1. Gross Merchandise Value (GMV)
This is the north star for most marketplaces.
What is it? GMV represents the total value of goods or services sold through your platform over a given period.
Why it matters: Have you ever wondered whether your commission or the entire transaction amount counts toward your revenue? Many marketplaces mistakenly report the full transaction value as “revenue”. If you sell a $1,000 guitar and take a 10% cut, your revenue is $100, but your GMV is $1,000.
- For Investors: GMV indicates the scale of your platform and your total addressable market (TAM). It shows how much money is flowing through your pipes.
- For Strategy: Tracking GMV growth helps you understand user adoption independent of your monetization strategy.
Example:
- 100 transactions x $1,000 price = $100,000 GMV
- 10% Commission = $10,000 Net Revenue
Note: While GMV is a vanity metric for profitability, it is the ultimate metric for scale.
2. Take Rate (The “Rake”)
What is it?
The percentage of GMV that you capture as revenue.
Net Revenue / GMV = Take Rate
Why it matters: This metric defines your business model.
- High Rake (>20%): Common in digital goods (stock photos) or high-trust managed marketplaces (Uber, Toptal). You need to provide massive value to justify this.
- Low Rake (<10%): Common in high-ticket items (real estate, cars) or open marketplaces (Craiglist, Etsy).
Strategy: Start low to build liquidity. As you add more value (insurance, vetting, tools), you can justify raising your take rate. However, push it too high, and you risk disintermediation (users taking the deal off-platform).
3. Liquidity
Liquidity is the lifeblood of a marketplace. It measures the probability that a buyer can find what they want, or a seller can make a sale. It is arguably the most important metric to track.
Seller Liquidity: “If I post a listing, what are the odds I sell it within 30 days?”
- Target: You want this high enough (50%+) so sellers don’t churn, but not 100% (which might mean you are underpricing or have a supply shortage).
Buyer Liquidity: “If I search for a plumber, what are the odds I find one available on Tuesday?”
- Target: This should be as close to 100% as possible. Failed searches are the #1 killer of retention.
Optimal Range: Interestingly, a 100% sell-through rate isn’t always ideal. It often means you are supply-constrained. A healthy marketplace usually hovers between 30% and 60% seller liquidity, ensuring buyers always have options.
4. Supplier Churn vs. Demand Churn
In SaaS, you have one churn number. In marketplaces, you have two.
Supplier Churn: This is critical. Acquiring supply is usually harder and more expensive than acquiring demand.
- Good Churn: Low-quality suppliers leaving (the “bad apples”).
- Bad Churn: Top earners leaving to cut you out (disintermediation) or moving to a competitor.
Strategy: Monitor “Power Seller Retention” separately. If your top 20% of sellers (who likely drive 80% of your GMV) start leaving, your platform is in trouble.
5. Supplier-to-Customer Ratio
What is it? The number of active suppliers relative to active customers.
Why it matters: There is no universal “right” number – it depends on your model.
- Uber: 1 driver can serve ~20 riders a day. High ratio.
- Airbnb: 1 host can serve ~1 guest at a time (per room). Low ratio.
Strategy: Use this to spot bottlenecks. If your ratio spikes, you have too many sellers competing for too few buyers (sellers will churn due to lack of earnings). If it drops, buyers can’t find matches (buyers will churn due to lack of supply).
6. Customer Acquisition Cost (CAC) and Lifetime Value (LTV)
This is standard business math, but with a twist. You must calculate it for both sides.
- Supply CAC: Cost to onboard a new seller.
- Supply LTV: Commission earned from that seller over their life.
- Demand CAC: Cost to acquire a buyer.
- Demand LTV: Commission earned from that buyer over their life.
The Golden Rule: LTV / CAC > 3
If your LTV is $300 and it costs $100 to acquire the user, you have a sustainable business. In marketplaces, you often subsidize one side (high CAC) with the profits from the other.
Tip: LTV in marketplaces is often non-linear. A few “whales” might drive massive LTV, while the long tail drives very little. Segment your LTV analysis by user cohorts.
7. Average Order Value (AOV)
What is it?
GMV / Number of Transactions
Why it matters: AOV dictates your unit economics and your marketing strategy.
- High AOV ($1000+): You can afford a lower take rate and higher CAC. You need a sales team or high-touch support (e.g., Airbnb, Flippa).
- Low AOV ($10): You need high volume, a high take rate, and automated support to survive (e.g., Fiverr, Uber).
8. Match Rate & Search-to-Fill
What is it? The percentage of search queries that result in a successful transaction (or at least a click).
Why it matters: This tells you if your search engine and inventory are actually working.
- If 1,000 people search for “Dog Walker in Chicago” and only 50 book one, your Match Rate is 5%.
- Why is it low? Is it pricing? Bad search results? No availability?
Improving your Match Rate is often the cheapest way to grow GMV, because you don’t need more traffic – you just need to convert the traffic you already have better.
Time to Fill: Closely related to Match Rate is Time to Fill. How long does a listing sit before it’s booked?
- Too fast? You are underpriced.
- Too slow? You have an inventory quality problem.
9. Net Promoter Score (NPS)
What is it? “How likely are you to recommend us to a friend?”
Why it matters: Marketplaces rely heavily on word-of-mouth and network effects. A high NPS (>50) means your users are doing your marketing for you. A low NPS means your growth bucket has a hole in it. Measure NPS for buyers and sellers separately – they often have very different experiences.
10. Cohort Analysis (Retention Over Time)
Aggregated churn numbers lie. To see the truth, you must look at cohorts.
A cohort is a group of users who joined in the same month. Tracking their GMV retention over 12-24 months reveals the long-term health of your marketplace.
- Healthy Cohort: Year 1 GMV is $100. Year 2 GMV is $120 (because users buy more or prices increased). This is “Net Negative Churn”.
- Unhealthy Cohort: Year 1 GMV is $100. Year 2 GMV is $20. You have a leaky bucket.
Marketplaces often have “smile curves” in retention. Users might be active, go dormant, and then reactivate when they have a specific need (e.g., hiring a plumber once a year). Don’t panic if monthly retention is low, as long as annual retention is stable.
11. Contribution Margin
What is it?
Net Revenue - Variable Costs (per order).
Why it matters: Many marketplaces grow GMV but lose money on every order. Variable costs include:
- Payment processing fees (Stripe/PayPal)
- Server costs per transaction
- Customer support costs per ticket
- Insurance or verification costs
If your Contribution Margin is negative, you can’t make it up in volume. You are just scaling your losses. You need to be “unit profitable” before you scale.
12. Concentration Risk (Whale Analysis)
What is it? The percentage of GMV driven by your top 1% of suppliers or buyers.
Why it matters: If one seller drives 20% of your revenue, you don’t have a marketplace; you have a partnership. If that seller leaves, or gets banned, your business collapses.
- Goal: High fragmentation. You want thousands of small sellers, not 5 giant ones.
- Strategy: Cap the exposure of any single seller, or build specific retention plans for your “Whales”.
Conclusion
Running a marketplace is like flying a plane with two engines. You need to monitor the RPM of both the left engine (supply) and the right engine (demand).
By keeping a close eye on GMV, Liquidity, and Unit Economics, you can spot imbalances before they become fatal. Remember, the goal is not just to grow, but to create efficient matches. A small, liquid marketplace is valuable. A large, illiquid one is a ghost town.
Regularly analyzing these metrics allows you to make data-driven decisions, balance the ecosystem, and implement strategies that foster growth, improve user satisfaction, and enhance profitability.
Track Every Marketplace Metric with Twosided
You shouldn’t need a team of data scientists to know if your marketplace is healthy.
Twosided gives you a pre-built dashboard designed specifically for 2-sided platforms. We automatically calculate:
- Real-time GMV and Take Rate
- Buyer vs. Seller Retention Cohorts
- Search Liquidity and Match Rates
- Whale Concentration Metrics
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