All metrics you should know to build a successful marketplace product

11 min readMar 19, 2023

As a Product Manager (PM), you must understand a business’s health to build a successful company. Product metrics allow you to track a business’s health. As a Director of Product for a marketplace product company, I researched all metrics to understand end-to-end marketplace business; however, I did not find a single source that gave me all the marketplace metrics in one place. Thus, this post develops a single-source playbook of marketplace metrics for marketplace PMs.

What is a marketplace?

Marketplaces — A marketplace company acts as an intermediary in selling a good or service between sellers and buyers. Marketplace company revenue generally collects the % of each transaction’s buyer process using the marketplace for a product or service. I

divided marketplace business into three parts:

Demand — Users who are looking to buy a product or service
Supply- Users who are looking to sell a product or service
Transaction — A financial transaction facilitating buying and selling between two parties.

Marketplace companies neither own supply nor provide products or services directly. They provide a platform where supply and demand discover each other and transact successfully.
Examples of marketplace businesses are Airbnb, Uber, Lyft, eBay, Etsy, DoorDash, Thumbtack, and TaskRabbit.

Marketplace metrics

Demand side (Consumers or Buyers)

Gross Merchandising Value (GMV)

GMV refers to the total sales dollar value of the transactions in a given period (total $ value of sold merchandise). GMV indicates how a marketplace business grows or whether customers use a marketplace product or service. For example, if Doordash received 200 orders in January and the total $ value of 200 orders is $200K, GMV for DoorDash in January is $200K.

Concentration or fragmentation of supply and demand

If most listings are from one seller or most orders are from one buyer, it is not suitable for your marketplace, and losing that seller or buyer will jeopardize the business. Thus, you want to ask how concentrated the marketplace is on the supply and demand sides. Diversification of supply and demand makes a marketplace more valuable, defensible, and sustainable. Marketplaces can measure concentration by measuring the % of GMV the top X sellers or buyers account for (e.g., the share of GMV each restaurant contributes, in the case of DoorDash in a given city as DoorDash may want to treat business in individual cities separately and make each city profitable).

% GMV of the top X% active buyers and sellers — To keep an eye on how your marketplace is fragmented or concentrated — you should find % of GMV of the top X% active buyers and sellers depending on the size and maturity of a product. For example, at Spocket, I focused on % GMV by the top 20% of suppliers to identify if we want to take a goal to onboard bigger suppliers.

Bounce rate

The bounce rate shows what percent of your customers leave the site after viewing only one page. The number needs to be low to indicate that buyers are interested in your website. Ideally, they should visit more than one page, searching for the required product. In the case of the marketplace product, I noticed that if the bounce rate is high, users are confused and not finding what they expect to see on your site. If possible, you want to set up a call with these users to understand their expectations.

Average time spent on site

This metric shows how much time consumers spend on the site per visit. This metric will also allow you to learn consumers’ engagement with the marketplace. If you could combine this metric with the bounce rate, you can understand overall engagement.

Match Rate

Marketplace businesses reduce search costs — making it efficient for customers to discover and match products or services. , it is crucial to track the “match rate” — the rate at which buyers can successfully find sellers and vice versa. However, there is no single formula or definition to determine this metric, and it varies depending on each business’s specific needs and objectives. Therefore, it is up to individual marketplace operators to decide how they define and measure match rates for their particular platform.

Consider a few examples of match rates based on popular marketplaces.

Doordash — Restaurant order rate — % of the time, are customers searching for a particular cuisine and ordering the same food.
LinkedIn — Application rate — How often are candidates discovering the right role and immediately applying?
Airbnb — Booking rate — How often are consumers able to find listings on Airbnb and book a night?

Supply Side (Suppliers or Sellers)

Number of suppliers

You can calculate the number of suppliers using a formula: Total # of Suppliers or Sellers in the previous month + # of new Suppliers or Sellers in the current month. This metric will help you to track the total number of suppliers listed on the marketplace.

Number of new suppliers

This metric indicates the number of new suppliers onboarded by your supplier acquisition team. You want to track this number weekly or monthly to understand how your supplier acquisition team performs.

Listings

Market Depth

Market depth allows us to understand if a marketplace has enough supply and ask, “Does it fit users’ needs?” As per A16Z, market depth means, “The concept of ‘offer depth’ or market depth originated from financial markets, defined as the market’s ability to sustain relatively large orders without price movements. The higher the number of buy and sell orders at each price, the greater the market depth.” For example, when consumers visit Etsy or eBay, do the sites have enough listings? On Doordash, do they have enough restaurants in each city to run their service? A critical question, in this case, for the supplier operations team to answer is what is the new seller onboarding rate, and how often are sellers churning?

Total product listings

You can calculate the total listings using the formula: Total # of listings in the previous month + # of new listings onboarded in the current month. This metric tracks the total number of listings listed on the marketplace.

New listings

This metric indicates the new suppliers onboarded in the current month. You want to track this number weekly or monthly to understand how your supplier acquisition team performs.

Listing growth rate (%)

The listing growth rate is equal to the total # of Listings in the current month — the total # of listings in the previous month / the total # of listings in the previous month. The listing growth rate indicates MoM growth or reduction on marketplace listings. It identifies efforts or investments you need to put on the supply side.

Average listing price

Imagine each listing price is between $10–100, and if you have 200 listings, then the average selling price is the sum of the prices of all listings divided by the total number of listings. This metric recommends the average listing price and identifies target customers based on customer affordability to pay.

Listings fees

The listing fee is a standard monthly fee marketplace could charge to sellers or suppliers to list their listings on a marketplace. The supplier-side listing fee is an additional revenue stream for marketplace businesses.

Time to match

Generally, marketplaces track how long it takes supply to match demand requirements. Because if your marketplace has lower time to match, your consumers continue to use your product. For instance, for job marketplaces like LinkedIn or Indeed, how long does it take an employer to find an employee? How long does it take to receive the first job application? How long does it take workers to receive the first task for TaskRabbit? How long does it take on DoorDash for restaurants to receive their first order? For product marketplaces, the time to match could be inventory turnover.

Liquidity

Liquidity is the most critical metric for the marketplace and suggests how buyers and sellers transact with each other. It can be calculated both on the buyer’s and the seller’s sides.

Seller’s liquidity defines the percentage of listings that result in transactions in a given period. Let’s check a few examples of how the seller’s or supplier’s liquidity will look like:

Uber measures the percentage of drivers on duty giving a ride at any time.
Etsy tracks the rate of products available that are sold in a month.
Airbnb calculates the proportion of rooms that are booked each night.

Buyer’s liquidity showcases the number of visits that will turn into a transaction. A simple way to estimate your buyer liquidity is to the number of transactions divided by the total number of visits.

Orders

Average Order Value (AOV)

AOV in a marketplace business is calculated as (the total order value / the number of orders) and indicates how much buyers spend on an average per transaction. This metric helps to develop new capabilities that will help consumers buy more products. For example, you can build product suggestions or recommendations for users to purchase similar or likable products.

Average Order Frequency (AOF)

AOF shares the average number of purchases per buyer per month. It indicates whether buyers keep coming back every month and purchasing or not.

Avg number of orders per supplier

This metric indicates the average number of orders suppliers receive per month. Using this metric, you can decide whether suppliers can earn enough money in your marketplace. This metric suggests suppliers’ motivation to stay in your marketplace. For example, on https://www.etsy.com/, sellers may go to another platform if they do not receive enough business. You want suppliers to spend more time on your marketplace, and this metric predicts suppliers’ performance.

Fulfillment rates

You can calculate the fulfillment rate using the following formula: Fulfillment rate = The number of fulfilled orders / the total number of orders (including rejected but excluding canceled orders). It reflects the percentage of the times a marketplace delivers goods or services as promised.

Unit Economics

Number of active sellers and buyers

I discussed Daily Active Users (DAU) / Monthly Active Users (MAU) here in my post. Generally, you want to identify DAU and MAU for both sides (Sellers and Buyers). This metric will indicate maturity of the marketplace and highlight how your users think about you in terms of the value you are adding to their life. The most critical part of DAU and MAU is how you define ‘Active’ users. Thus, I would recommend that you first align with your internal stakeholders on the definition of active users before you start tracking DAU and MAU metrics. Once you know the clear definition of DAU, you will be able to understand how your marketplace is growing and it is a good indicator of marketplace usage and growth.

Customer acquisition cost for seller and buyer

Customer Acquisition Cost (CAC) helps you discover the average dollars spent to acquire a customer. CAC is calculated by adding the marketing & sales spend for a given period and dividing that by the number of customers gained during that period. CAC is an inevitable cost, and gauging these expenses would let you know when your business would cover these costs and be profitable. CAC is a good indicator to understand how a business will or will not scale in the future.

Lifetime value for seller and buyer

Lifetime is roughly the average number of months or years customers use your product. Lifetime Value (LTV) is the revenue that the customer will bring throughout their time with your company. It tells you the actual value of your conversions. There are multiple formulas to calculate LTV. One way to calculate LTV is to divide ARPU by Churn rate. LTV and CAC will give you underlying unit economics to understand business viability.

Companies or investors calculate unit economics to forecast when a business will break-even or become profitable. CAC:LTV ratio will give investors insight about a business’s value. A general rule of thumb for SaaS businesses is to demonstrate three times more value than customer acquisition cost; thus it is better to have CAC:LTV ratio 1:3 or better.

Business metrics

Take rate

Take rate or rake, is the percentage of GMV collected by the marketplace and typically falls between 10% and 30%. High take rates are associated with exclusivity, for example, The App Store can charge 30% because it’s the single point of access to over one billion iOS devices.

Revenue

Revenue for marketplace products or services is a percentage a company decides to take on every order they process between buyers and sellers. For example, Uber charges partners 25% fee on all fares (Note: This fee is known as Take Rate and generally falls anywhere between 10%-30%). So in January if the total trip $ value for Uber is $200K, their revenue will be 25% of $200K = $50K. Reference — Uber Document

The online shopping marketplace revenue comprises two parts:

an ecommerce marketplace store transaction fee and listing fee (marked with orange color);
seller services: direct checkout, promoted listings, shipping labels (marked with pink color).

Buyer to seller ratio

Buyer-to-Seller ratio is calculated as transactions per buyer / transactions per seller. This metric helps marketplaces to guide user growth initiatives.

Seller and buyer overlap

Buyer/Seller Overlap is the number of buyers who are also sellers. A high overlap decreases CAC because you get both a buyer and a seller for each acquisition.

Prevalence of multi-tenanting

How many of your users also use other similar services? How many users are active on similar services?

Switching or multi-homing costs

How easy is it for users to join a new (or even nonexistent) network? How much value can users get as a new user from joining a different network?

Trust and safety

Trust and safety are vital metrics for your online marketplace success. Marketplace buyers buy products or services directly from sellers and it is the marketplace company’s responsibility to establish trust between both parties. Marketplace companies generally enable trust using different techniques such as identity verification, reviews and rating system, a detailed feedback system; efficient means of communication between users; swift problem resolution; and anti-fraud measures.

Customer Satisfaction

NPS for seller and buyer

Net Promoter Score (NPS) tracks customer satisfaction by subtracting detractors from promoters; promoters give scores of nine or ten, and detractors give scores of six or below. An NPS over zero is good and an NPS of 50 or more is excellent. NPS suggests how customers feel after using your product or interacting with your Customer Support (CS) team. Low NPS does not mean your product is terrible; sometimes, it could be a bad interaction with a CS agent.

Promoters: Score of 9 and 10
Passives: Score 7 to 8
Detractors: Score 0 to 6

Customer Satisfaction Score (CSAT)

The Customer Satisfaction Score (CSAT) assesses a user’s satisfaction or dissatisfaction with a specific product/service. Users rate a product/service on a scale of 1–3, 1–5, or 1–10. You can calculate CSAT using: The total number of scores / The number of respondents

Customer support team metrics

Marketplaces also track other support-related metrics for customer support (CS) teams. Adding a few example metrics below:

Total avg support ticket daily/weekly and monthly
Avg first response time — highest first response time and lowest first response time
Avg resolution time per ticket
# of reviews
# of comments or replies per ticket
# of tickets resolved on same day / new # of tickets on that day
Language and politeness in the response
Grammar and response quality
Avg # of tickets handled or responded by per agent in a given day

Conclusion

The overall goal of this post was to help you understand all the marketplace metrics to build a successful marketplace company. If you find the above marketplace metrics guide helpful, please check out my three part series Identify the metric that matters most. Feel free to comment with any other marketplace product metric you found useful, and I will add them to the above list.