By: Colin Gardiner
As labor marketplaces mature, growth stops being just a function of acquisition. Retention, defensibility, and depth of engagement start to matter far more. Platforms that rely solely on transactional matching often struggle with churn, multi-homing, and disintermediation as users look for value elsewhere.
This article is part two of a three-part labor marketplace series, examining how marketplaces move beyond acquisition by embedding into workflows, creating supply, and building defensibility over time. This article explores how embedding deeper into your customers’ workflows can change that dynamic. We’ll look at what embedding actually means in a labor marketplace, how creating your own supply can unlock scale, and why technology choices play a critical role in reducing friction and increasing stickiness. The goal isn’t just to facilitate transactions, but to become infrastructure your users rely on to run their business.
As marketplaces move beyond early growth, the question shifts from how to acquire users to how to keep them. The strongest platforms are not just destinations for transactions, but systems their users depend on to operate day to day. That dependency is created through embedding, where the marketplace becomes part of a customer’s workflow rather than a tool they occasionally visit.
Embedding with you customers
Embedding with your customers is one of the key defensibilities of a marketplace, as it discourages disintermediation and multi-homing, allowing them to rely solely on your platform for their business. One of the most exciting business models that can be built with a marketplace is adding a software-as-a-service (SaaS), fintech, or insurtech component.
The beauty of this model is that it allows you to embed deeper with the supply or demand side of the marketplace, offering them something that brings them in and keeps them engaged with your platform. Essentially, you are providing a ‘come for the software, stay for the marketplace’ or ‘come for the marketplace, stay for the software’ value proposition. One of the key advantages is the ability to build trust with your users. By offering an embedded solution that meets their needs, you demonstrate that you are invested in their success and are willing to put in the effort to support them.
This approach helps to create stickiness and prevents typical problems in traditional marketplaces, such as disintermediation or multi-homing. By offering additional value to your users beyond just the marketplace, you create a more integrated experience that shows your product differentiation, builds brand, helps them run their business, and keeps them coming back for more.
What might embedding look like in a labor marketplace? One great example is providing payroll services for employers. Products like Everee provide white-label payroll services, and if you work with small-to-medium size businesses that rely on you for all their labor needs, it’s a natural extension to financial tools like payroll. Moreover, the deep embedding required to do that locks them into you as a platform and allows for full visibility if they find a worker on your marketplace but go outside to hire them or even hire them full-time.
Embedding is a powerful way to build a sustainable platform by delivering real operational value beyond matching. By running part of your users’ business on your platform, you increase trust, retention, and defensibility. But even deeply embedded marketplaces can stall if they cannot consistently meet demand. As many labor markets face structural shortages, the next challenge becomes ensuring reliable, scalable access to supply.
Creating your supply
While it may seem easy to acquire supply and demand, specifically supply in the labor market, it can be challenging to find enough labor to make the marketplace scale. There are often labor shortages in different industries, and it can be inherently hard to get enough labor to match with employers.
One solution to this issue is to create a marketplace similar to embedding but as a service. By switching to a vocational model, it is possible to train workers and have them tethered to the marketplace by teaching them and giving them accreditation. This approach facilitates hiring on the platform, reducing churn and increasing market liquidity.
There are numerous opportunities to create a supply of labor in local markets by providing education and training. By doing so, you can establish a pipeline of skilled workers who are committed to your marketplace for a certain period of time. To achieve this, you may set specific requirements or payback periods for the training provided.
Creating your own supply through training and accreditation can stabilize liquidity and reduce churn, but it also adds operational complexity. Managing education pipelines, credentials, and workforce performance at scale requires strong systems behind the scenes. As marketplaces take on these responsibilities, technology becomes the primary lever for maintaining efficiency, visibility, and growth.
Leveraging technology
Technology is at the core of online labor marketplaces: leveraging it effectively is essential to your success. Marketplaces drive the most value when they increase matching and technology plays a massive part in this. It’s imperative you invest in the right tools and platforms to support your marketplace and improve the user experience.
These investments can look like:
- Using advanced matching algorithms that can reduce search costs and improve the quality of matches between workers and employers.
- Employing artificial intelligence and machine learning to analyze user data and provide personalized recommendations for workers and employers. The rise of ChatGPT has changed the face of work both for your company and also for the workers in your marketplace.
- Develop mobile apps and other technologies that make it easier for users to access your marketplace on the go. Great products meet customers where they are, which is highly important in labor markets. If you are aggregating service workers, they need to have app or SMS-based tools, because they’re not desk workers.
- Build sustainable infrastructure that allows your product to be lightning-fast and magical. Investing heavily in the core infrastructure that your product relies on will pay dividends as you scale.
As technology becomes more deeply embedded in the marketplace experience, it also becomes a key differentiator. The tools you choose and how quickly you evolve them directly shape user expectations and market positioning. In fast-moving labor markets, technical advantage alone is not enough. Long-term success depends on how well you anticipate change and stay ahead of competitors responding to the same trends.
Staying ahead of the competition
Finally, one of the most important strategies for growing your online labor marketplace is to stay ahead of the competition. This means keeping a close eye on market trends and new technologies and being willing to adapt your business model to stay relevant. Staying ahead does not mean you need to focus on your competition, but be aware of them and understand their offerings thoroughly.
Here are five ways to mind your competitive landscape:
1. Monitor the market. Watch market trends and be willing to pivot your business model if necessary to reflect changing regulations, macroeconomics, or cultural tides. Being responsive is a core competency that can differentiate from competitors.
2. Be the first to leverage technology. Stay up-to-date with new technologies and tools to improve the user experience and support your growth. Things like artificial intelligence are changing the way we work and potentially the face of labor markets. How can it improve workflows and productivity in general?
3. Brand, brand, brand. Focus on building a solid brand and reputation to help you stand out in a crowded market. If your market is highly commoditized, make this a priority. The strongest brands invest heavily early and reap dividends in the long run.
4. Adding ancillary services. Consider offering additional services such as insurance, legal services and others to enhance the user experience and help build trust with your user in ways that your competitors don’t. This creates differentiation.
5. Building strong partnerships. Partnering with complementary businesses can be a competitive moat as it associates your company with that other company and, therefore, their brand. Additionally you can box out the competitors from working with those companies, which again creates defensibility and deeper network effect for your business.
Staying competitive in labor marketplaces is not about reacting to every new entrant or trend, but about building an organization that can continuously adapt. When strong fundamentals, thoughtful technology choices, and deep customer embedding come together, marketplaces are better positioned to weather change and compound over time. These forces are reshaping how labor is discovered, managed, and paid, pointing toward a future where marketplaces play a more central role in how work gets done.
An exciting future for marketplaces
Growing an online labor marketplace is a complex and challenging process, but with the right strategies and tactics, it’s also incredibly rewarding. By focusing on the user experience, building a solid reputation system, creating network effects, leveraging technology, navigating disintermediation, scaling your marketplace, and staying ahead of the competition, you can build a thriving online labor marketplace that meets the needs of workers and employers alike.
If you’re building a labor marketplace and need compliant, real-time pay, book time with us.
About the author
Colin Gardiner is the General Partner of Yonder, a $4.64M pre-seed fund that invests in marketplaces and network effect businesses. He is an experienced tech entrepreneur and former economist with a specialization in microeconomics and labor markets.
With a track record of working with over 100 marketplaces, Colin has played a critical role in the growth of industry-leading platforms. He has helped companies raise over $250M and scale multiple businesses past $1B in GMV, including Outdoorsy, Roamly, Tripping.com, Ancestry.com, and JustAnswer. His expertise lies in digital marketplaces and platforms, focusing on growth, monetization, retention, analytics, insurance, finance, and unit economics.
In addition to his work with Yonder, Colin runs the largest marketplace newsletter, Take Rate, which has over 5,000 subscribers. He is also the founder of Karta Labs, a marketplace consulting and advisory business.
Before his career in startups, Colin worked at the Federal Reserve Bank of San Francisco as a Research Associate, where he conducted microeconomic research on the labor market and inflation.
You can learn more about his work at Yonder, subscribe to his newsletter Take Rate, and follow him on X and LinkedIn.