Maintenance
Part of The five tolls that decide whether platform models actually work
Choosing a platform fee base: four options compared
Compare four platform fee bases by what each grows with and where it fails, then settle three decisions before any later fee change.
A platform fee has two jobs. It has to charge on something that tracks the value a participant receives, and it has to be changeable later without a revolt. Both can be decided on paper, before the first invoice goes out.
The first job is choosing the fee base. The second is deciding how it may change. They belong together, because the base you pick decides how visible a later change will be, and a base you cannot explain to a participant is one you will not be able to change.
What to take away
- The fee base decides what grows your revenuevalue, volume, access or listings.
- Overlapping charges cannot be explained in a negotiation.
- A fee base has to survive being shown to the buyer in full.
- Settle the review trigger, the notice period and the protected terms before the first increase is needed.
Four fee bases side by side
Pick the base that grows when the platform delivers value, then check where it fails. Each of the four charges for something different, and each has a point at which participants stop seeing the fee as fair. That point is easier to find on a page than in a dispute.
| Fee base | Charged when | Revenue grows with | Check before choosing |
|---|---|---|---|
| Transaction value | A sale completes, as a percentage | Value exchanged | Whether participants can complete the sale somewhere else |
| Each transaction | A transaction occurs, as a fixed amount | Number of transactions | Whether a fixed amount feels fair on small and large sales alike |
| Access | Each period of continued use | Participants who stay | Whether they see enough value between visits |
| Listings or leads | An offer is posted or a lead is received | Posts or leads delivered | Whether a listing or lead can cost money and produce nothing |
Etsy is a familiar place to compare a charge tied to a completed sale with one tied to a listing. A listing charge is paid whether or not the item sells, while a sale-based charge is paid only when it does. Neither basis is right for every platform.
Four fee bases compared
Basis
- Share of transaction value
- Value flowing through
- Fixed fee per transaction
- Volume
- Subscription for access
- Participant count
- Charge for placement
- Competition among participants
Grows with
- Share of transaction value
- High-value low-effort deals leave
- Fixed fee per transaction
- Small transactions uneconomic
- Subscription for access
- Heavy users subsidized by light
- Charge for placement
- Conflicts with what buyers want
Fails when
- Share of transaction value
- Fixed fee per transaction
- Subscription for access
- Charge for placement
When two bases share one platform
Two bases are fine as long as somebody can say what each is for. A percentage might pay for matching while a subscription pays for access. Overlapping charges leave a structure nobody can explain, and the layer discipline that prevents it is in pricing architecture.
A high percentage of value needs rules that stop participants transacting elsewhere. Those rules are part of the price, and the questions about measuring that leakage are worked through in marketplace models questions.
Where such rules also govern how participants may compete with each other or with you, they cross into law. In the United States, the Federal Trade Commission and the Department of Justice's Antitrust Division enforce federal antitrust law, and Sherman Act Section 2 addresses monopolization. Whether conduct violates the law depends on the facts, so consult a lawyer.
Showing the fee in the price
A fee base also has to survive being displayed. Under the FTC's unfair or deceptive fees rule, a business that includes pricing information in its ads and other offers must tell people upfront the total price they will pay for live-event tickets or short-term lodging.
That rule names two kinds of sale, so first confirm whether yours is one of them. If it is, a mandatory platform charge in the same transaction is exactly what to put in front of a lawyer. Rules outside the company shift too, and platform rule changes are worth tracking beside the fee.
Three decisions before any fee change
Raising a platform fee is the hardest price change there is, because it reaches every participant at once and becomes public immediately. The remedy is a short rule, written before the first increase is needed, that answers three questions:
- What review trigger permits a change, so an increase never looks arbitrary?
- What notice period do participants receive before it takes effect?
- Which terms are protected from change, so participants can still plan?
A platform that has never written this down discovers that it cannot raise a fee at all without a coordinated reaction. One that wrote it down at the start has a term to point at.
Decide before raising fees
- What triggers a review
- How much notice participants get
- Whether notice differs by size
- What is protected, for whom
- Until when protection lasts
The base shapes how the rule reads. A change to a percentage reaches every sale, a per-transaction change reaches every transaction, an access change reaches every participant who stays, and a listing change reaches every post. The guide to adjusting prices covers keeping trust through such a change.
Stress-testing the three decisions
Use a marketplace such as Airbnb as the test case. Take each commitment in the rule and ask how it would apply to host-side fees and to guest-side fees separately. If the notice period suits one side and not the other, the rule is unfinished.
Then write the failure sentence for each commitment: what would have to be true for it to stop working. Those sentences are the measures worth watching, and platform models metrics helps choose which ones to track and which to ignore.
Common questions
Can a platform use two fee bases?
Yes, provided each has a stated purpose. The count is not the problem. Charges that duplicate each other are.
When should the change rule be written?
Before the first increase is needed. A rule is far easier to agree while nobody is affected by it, and a later increase reaches everyone at once.
Does the fee base decide which side pays?
No. Which side pays is a separate decision. The fee base is about what the charge is attached to once that is settled.
Should the fee schedule be public?
For a platform with many small participants, yes, because a private schedule at that scale becomes public anyway and looks worse when it does. For a small number of large participants, negotiated terms are normal.
