In many ways, online marketplaces are the perfect business model. Since they just facilitate transactions between suppliers and customers rather than take possession of or full responsibility for products or services, they have very low cost structures and very high gross margins - 70% for eBay, 60% for Etsy. And network effects make them highly defensible. Alibaba, Craigslist, eBay, and Rakuten are more than 15 years old, but they still dominate their sectors.
"Network Effects Aren't Enough" is from the April 2016 issue of Harvard Business Review.