Services marketplaces revolution:

There are a lot of marketplaces springing up, and in the case of a services marketplace, geographical growth planning is a key consideration – so how do they decide? Let’s break it down with a simple example for Postmates, a $138M funded, delivery & logistics company that is expanding like crazy:

High density = high efficiency: 

The first two key factors to consider aside from immediate proximity to existing locations is a city’s population and density. Why you ask? Well because that means we can make the most amount of money with the least amount of time inefficiencies of course!

Normalizing the metrics:

It doesn’t do us any good to look at a cities total population or density, we need to be able to see how it compares to it’s peers. To do this we we use the following formula in excel using a table named with a column named “Population”:

=NORM.S.DIST(STANDARDIZE([@Population],AVERAGE([Population]),STDEV.S([Population])),TRUE)

This will give us what percentile the city ranks in relative to it’s peers’ city populations. We can then do the same for the population density, multiply Population Percentile * Density Percentile * 10 to get an overall value score for the city.

Postmates’ next 5 cities:

After comparing which cities Postmates is already in we get a view of which cities are left unchartered, sorted by the highest overall value score. We’re not done there though, we don’t want to go to a small city, so we can filter the results to show only the cities with populations in the top 50th percentile and we get the below:

This is of course an oversimplified approach, but it is pretty easy to see the methodology. To take this further you would simply need to identify other decision factors and then incorporate them into the filter and sort logic.

You can download the excel sheet here and if you liked this post, please do follow The Berlin Wall Newsletter!

 

Cheers,

Michael Berliner