Digital marketplaces are eating the economy, and they’re coming for recruitment

Digital marketplaces are consuming the economy, drastically increasing the efficiency of particular markets and changing the way that people and businesses transact. Although these marketplaces are becoming pervasive, allowing us (amongst many others) to hail a cab, find a date and sell things using our phones, certain sectors of the economy are yet to be touched by the emergence of these online platforms. Recruitment is one such area, and is a market that remains complex and highly fragmented. LinkedIn has gone some way to bringing professional/white collar recruitment online. However, there remains a vast spectrum of employers and jobseekers left behind. This is destined to change – but what sort of platform will emerge to fill this gap?
Fundamentally, for a digital marketplace to function, it needs to facilitate the connection, communication, and transaction of two (or more) parties are on opposite sides of supply/demand relationship. Despite this, not all marketplaces are created equal, and some are more passive than others. A marketplace’s  ‘passiveness’ can be determined by examining:

1. How many active participants it has;
2. When/how frequently the parties interact/transact;
3. The immediacy of the transaction.

In examining some market leaders one can attempt to develop a measure of this, and determine where on this scale the the future of recruitment lies.In an economy that is increasingly networked, there are numerous marketplaces that could be substituted for those in the above chart: BlaBlaCar, Hailo, LinkedIn, BlueApron and Etsy, to name but a few. Some of these companies could be shifted up/down the line depending on the nature of a particular user. For example, a host on Airbnb may be trying to fill their property at short notice, or be offering it for a period months in advance. Similarly a guest may plan ahead in arranging a place to stay, or be seeking a last-minute bed. The pace of the transaction depends heavily upon the activity of platform participants. With this in mind, the companies above have been positioned based on an assessment of the behaviour of a typical user.
Moving from this assessment it is possible to group the companies into two broader groups: active marketplaces and convenience/facilitator marketplaces. 
Where do recruitment marketplaces fit into this framework? Given the vastly different nature of work in the economy and the  different required from the high-end digital sector to lower-end blue collar jobs, there is no broad-brush answer. Let’s take a look at three recruitment marketplaces case studies, and how their models differ:

1. LinkedIn uses a network-based model, expanding their service from a business networking platform into a jobs marketplace. The impetus for recruitment isn’t weighted towards either the jobseeker or employer, with much of the information publicly available for both parties to act upon.
2. HIRED, which focusses higher-skilled digital economy roles uses a model whereby the employer is matched to candidates, relying on thorough candidate profiles that detail both their past experience and aspirations for future employment. In some ways, this is similar to LinkedIn’s function whereby job seekers can secretly tell employers that they are open to passive recruitment, allowing jobseekers to be scouted by recruiters/employers.
3. inploi uses a model where both candidate and employer must act in order to connect. Focusing on the blue collar economy, inploi depends on both parties to create sector-relevant profiles, facilitating faster interactions and transactions in high-turnover employment verticals.

LinkedIn, HIRED and inploi therefore cater to differing verticals of the recruitment economy.
Today’s dominant marketplaces started off by effectively capturing a specific niche in the market. Although they are now household names, eBay and Airbnb are good examples of companies that grew from rudimentary beginnings. eBay, for example, was designed as an e-commerce platform, but was used by its founder (and his wife-to-be) to search for collectors who shared their passion for Pez dispensers. Airbnb was founded when a group of roommates decided to rent out air mattresses on their living room floor to businessmen in an oversaturated hotel/B&B market.
Regardless of their chosen niche, Airbnb, Deliveroo and eBay are good examples of companies that have established themselves as the go-to marketplace for a particular service. Specialisation has allowed them to reduce complexity and friction in B2B, B2C or C2C transactions and achieve liquidity, which subsequently made the move into other areas significantly easier. We are seeing the beginnings of this level of specialisation (and consequent capacity to scale) in online recruitment and HR-tech platforms.
Recruitment marketplaces have the potential for rapid market growth, with the ongoing establishment and adoption of verticalised digital platforms and networking solutions. However, in order for them to succeed, they need to overcome the challenge of balancing demand and supply in a market characterised by high turnover.
Specialism from the outset (as is evident in the above case studies), will assist in establishing platforms within specific niches, enabling companies to build a critical mass of users and the community trust that are crucial to scale.
It is clearly still a multi-horse race, with many specific verticals yet to be won. With continued fundraising bolstering the activity of recruitment marketplace startups it is likely to be an interesting and dynamic space for the next few years.
Cover image: Shutterstock

This article first appeared on LinkedIn on 10th March 2017.

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