In a marketplace - is it better to charge commission from buyer or seller (or split it)?

This is largely an optics question.  At the end of the day:  a buyer pays X, the marketplace takes Y, the seller gets X-Y.  Financially, it doesn't matter which side is charged.  However, optics do matter and do influence behavior.  Generally speaking, I think it is best to optimize for the buyer's workflow and customer experience, and therefore they should see "no extra fees."   Whereas, the seller should see that they are clearly paying a "service fee of xx%."   It's important to be transparent with all fees to both sides.  If either side feels that they have been misled about fees, they will be upset and highly prone to disintermediation.

For taxes and commissions, often it's better or easier to charge the side that meets the most of the following criteria: more easily can come up with the money there are fewer of in the marketplace, are more constantly making transactions going to be charged some sort of fee anyway not doing the price comparison While there is really no difference in the incidence of the commission on buyer or seller (or tax, in case of a government tax) you want to make collection as easy on yourself as possible. The side that can more easily come up with the money When houses are sold and a Realtor is used, there is generally a 6% commission that is evenly split between the buyer's agent and the seller's agent. However, the buyer pays no fee directly to their agent. The full commission is charged to the seller. Why does this make sense? Someone who is selling a house generally has equity in the house and therefore will be easier to collect from than the buyer, who is already putting down a whole bunch of money in taxes, fees, and a down payment, and would be more likely to have difficulty paying the commission. By charging the seller the commission, the commission gets factored into the price of the house and any increase in the price of the house due to that cost can be factored into the mortgage of the buyer. Also note that eBay charges the seller as well, because the seller will have cash after selling their product, out of which the commission can be paid. Apartment brokers in NYC sort of fall under this criteria, even though they charge the buyer a fee to move in instead of the seller (landlord). It's much easier for the broker to collect their fee from the buyer prior to allowing them to move in than it is to try to collect their fees from the landlord. The landlord would just try to collect those fees from the tenant upfront anyway if the broker charged them - and most landlords would refuse to pay fees that they might have a difficult time collecting on themselves. And understandably brokers want their cut immediately before any paperwork is signed (while they still have negotiating power) instead of having to chase down their money - thus they won't just charge the landlord a set amount per month. The side that there are fewer of in the marketplace or are more constantly making transactions Let's assume the government wants to put a tariff of $500 on every automobile sold in the US. The government is trying to decide whether to charge the auto dealers (of which there are thousands) or the auto manufacturer (of which there are very few). In this situation it would probably be much easier and less hassle to collect the tax from the auto manufacturers since there are fewer entities that need to comply and the administration of the tax would be much simpler. Again, eBay is also a good example. While there are millions of buyers who make only a few transactions a year, there are a lesser number of sellers, many who are selling thousands of items in a year. It's much easier to educate the high-volume sellers about the commissions and fees than it would be to educate every single buyer. The side that's going to be charged some sort of fee anyway Again, let's look at eBay. The seller is charged an insertion fee for making a listing (to preserve the quality of their listings). Since eBay is already charging them something, it's easier to charge the entire commission to them instead of trying to collect the money from two entities. Back to apartment brokers in NYC - since the people renting the apartments are going to be paying money anyway, by collecting the commission from them the broker doesn't have to bother billing the landlord at all. The side not doing the price comparison When people buy from eBay, they're often comparing the price on eBay to Amazon and local merchants. When people are buying houses, they're comparing houses with Realtors and houses that don't have Realtors. Since it's easier for buyers to compare apples to apples, when people are doing price comparisons you don't want to add a commission to what they have to pay for some things versus others as it makes the comparison much more difficult. Often based on these criteria the seller is the one who ends up paying the commission (but not always).

Charge the one who gets the most value out of it. If both are getting good value, charge both! At the beginning, it's a chicken & egg problem nevertheless. You probably need to make it free for both in order to raise the marketplace.

Its no new game from Offline. We have so many offline market places and have you seen you been charged for entering a market or a mall. No its been presented as user convenience. Marketplace has to charge Sellers in what ever form it can be per listing, per sale, fixed fees etc. But, eventually sellers are smart enough to add this cost back to the product cost while selling. So All in All its always the consumer who pays for it indirectly.

I think it is better to charge the seller, as he/she would probably need to give a small cut from his earnings while the buyer may find it an additional overhead. It is true that the the marketplace is providing value to both buyers and sellers, but I still think that for faster growth of the marketplace, at least in the initial phases, it is better to charge the seller instead of the buyer.

Depends on the market and your competitive position. 1. Are you a market leader / first on the market? Set the rules! If not follow the leader 2. Which side benefits the most from the transaction should pay. Is it a buyers or sellers market?

I suggest reading this "a HBR article named Strategies for two side marketplaces"

At the beginning,  you should  make it free for both in order to get more users than it is better to charge to buyer. thanks