Choosing a Market, Starting a Fire: The Basics of Marketplace Growth

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Choosing a Market

One of the most daunting yet crucial decisions you’ll have to make is choosing the right initial target market. Choose wisely and the marketplace will catch on so quickly that scaling it will be your biggest challenge. 

First, you’ll need to understand your staffing agency’s network effects. Keep in mind, it’s likely to be different for different segments of your business. For example, per-diem healthcare has strong local network effects while travel healthcare has a national network effect.

What are network effects?

“The term network effect refers to any situation in which the value of a product, service, or platform depends on the number of buyers, sellers, or users who leverage it. Typically, the greater the number of buyers, sellers, or users, the greater the network effect—and the greater the value created by the offering.”
– HBR,

We can examine Uber to show the power of network effects in building a marketplace. As drivers start working through Uber, they’ll only stay on if there are enough passengers. Similarly, passengers need to be able to get an affordable ride in 5 minutes or less. When Uber first launches in a new city, the wait times can be high and prices prone to surges, but over time more drivers enter the network making the experience smoother for passengers, who then increase their usage, incentivizing more drivers to work.

With that lens in mind, let’s take a look at some of the factors that affect most two-sided marketplaces. We’ll learn how we can optimize our choice of initial target market to give us the best chance of a successful launch and continued marketplace growth.


It’s long been proven effective that launching a two-sided marketplace in one city or area at a time will maximize the chances of clients and workers getting matched successfully in the early days when liquidity is still low. Where do you have the highest density of clients? How far will workers travel to jobs? What kind of transportation options do they have available?

Supply/Demand Balance

Does your target segment generally have a long-term balanced supply and demand, or is it always in flux? Is that balance changing every week, seasonally, or over many years? For example, warehouse workers might be harder to find when unemployment is low but that effect plays out over years, while the demand for bartenders could spike and drop depending on what’s happening in a city that weekend. For your initial target market, you want to choose something with more predictable supply-demand patterns.


How often are transactions happening in your target market? If every placement is 3 months or longer, the marketplace will have a lower frequency of transactions with a higher transaction value. On the other hand, shift-based work such as in hospitality, retail, or per-diem nursing has a high frequency (multiple times per week) and a lower value per transaction (booking shifts for a week or two at a time).

If given the choice, it often makes sense to tackle high-frequency markets first since the ease-of-use and superior experience are valued more when people use something every day.

Competitive Positioning

Which market is underserved? You want to find a geography-skill combination that’s not well-served by your competitors to give you the opportunity to win the market more quickly. An alternative approach — find a market served by slower competitors that you can disrupt.

Pilot the Marketplace with Trusted Clients

Choose clients who are looking for more efficiency, visibility, and control, and are ready to invest their team’s time into learning and co-creating a new process. Their continuous feedback is extremely valuable in the early stages, and they’ll also be patient as you work out any kinks in the process.

Starting a fire

I often use a helpful analogy to plan marketplace launches: starting a fire. First, you need to make sure we’ve got a lot of oxygen. In this analogy, that’s the demand for your service. If you’ve done a good job choosing your target market, you won’t have any problems there.

Next, you’ll need paper — the first few pilot clients who are willing to go on the journey with you —  and kindling — the workers in your hyper-focused initial target market.

You’ve lined up some branches and logs (broadening your target market) so they catch once everything else does. With all the pieces arranged, you’re ready to start the fire. On your marketplace’s launch day, you send out the first invites — the spark. If all goes well, you should just need one.

To stretch the analogy a little further, you might want to add on some fire starter at any time. These are the ads, promos, referral codes, and other incentives you can use to boost either side of your marketplace and balance supply and demand.

Once you’ve got a little fire roaring, you can start chucking on a few more big logs. It’s time to take a step back and watch your market grow.


Read our other blogs in the marketplace series:

The Staffing Industry is Ready for a Tech Leap Forward

Supercharge Your Agency with a Staffing Platform

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