From growth to fee extraction
Sean Frank, CEO of Ridge, on the state of ecommerce post-COVID
The core shift is from expanding volume to monetizing dependence. Once a marketplace already has the shoppers, the search traffic, and a huge seller base, the easiest profit lever is not selling more goods, it is charging merchants more for access, fulfillment, and placement. Amazon fits that pattern, because third party seller services and ads now matter more than owning inventory, and similar marketplaces like Instacart and Uber have also leaned into high margin ads layered on top of transaction fees.
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Amazon has become much more of a seller monetization machine than a classic retailer. Third party sales were 60% of retail sales in 2024, seller services reached $140B per year, and ads reached $48B, which gives Amazon a strong reason to keep merchants competing inside its marketplace instead of replacing them with private label goods.
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Fee extraction is literal in workflow terms. A merchant pays referral fees, fulfillment fees, storage fees, and now can also face low inventory level fees if stock runs too lean. Then the same merchant often has to buy ads to stay visible in search results against rival sellers offering near identical products.
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This is not unique to Amazon. Instacart has layered ad revenue on top of grocery delivery take rates, and Uber has scaled ads to more than a $1B revenue run rate. In each case, once the marketplace owns customer demand, selling sponsored placement becomes much more profitable than the underlying transaction.
The next phase is marketplaces acting more like toll roads and ad exchanges. The winners will be platforms that keep buyer demand concentrated while increasing the number of ways sellers and brands can pay for visibility, speed, and conversion. For merchants, that means margin pressure rises even if customer demand stays flat, because access to demand becomes the product being sold.