The 8 Most Important Metrics for Marketplace Growth
Several founders have asked us for tips to structure their data-driven approach to growing a marketplace, so we’ve decided to publish a guide to help founders do it.
To save you time, we’ve built for you a generic dashboard for a marketplace, in open-source.
Let’s now consider some of the most important KPIs of this dashboard.
- Gross merchandise volume (GMV) looks at the total sales dollar value of sold merchandise. It's a crucial metric for marketplaces, though revenue is still the top indicator of value.
- Average Order Value (AOV) is the average revenue per transaction (total revenue / number of transactions) and indicates how much a business can afford to spend on acquisition and similar per-transaction expenses.
- Take rate, aka rake, is the percentage of GMV collected by the marketplace and typically falls between 10% and 30%. High take rates are associated with exclusivity, e.g., The App Store can charge 30% because it's the single point of access to over one billion iOS devices.
- 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.
- Buyer-to-Seller ratio might be best measured as transactions per buyer / transactions per seller to more accurately guide user growth initiatives.
- Contribution Margin is sales minus variable costs and determines profit per unit. Contribution margin ratio is the contribution market/total sales and represents the percentage of revenue left over after subtracting all variable costs.
- Quick ratio compares growth to churn. For users, it's new and resurrected users/churned users; for revenue (specifically MRR) it's new and resurrected users + upgrades/cancelled users + downgrades. SaaS companies should aim for an MMR quick ratio over four.
- 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.
Summarized by Reforge. Original article by Willy Braun • Co-founder @ Daphni VC