Marketplace sites are one of the hardest types of sites to promote to be honest.

With $500, I would do a give away to get members to sign up that way. Example sign up to our site and have a chance at winning $500 or an iPad or something similar to that, some times people just like the money.

But then again you need to promote the give away, you can do that on forums, ozbargin style sites. 

Or you could even pay people to sign up at a $1 CPA (500 sign ups) but how engaged are they, I saw some trying to do that recently as well. 

Or you could do something creative with the competition where people upload a video online for example..

I find giveaways, especially when you are starting out, of very little use. You get a very low quality type of consumer/customer and you only get their email/like/visit as they want your giveaway. They either sign up with a fake email, fake fb account, and /or unlike you afterwards - i've had experience with this.

If I were to startup a website, i would throw the $500 into adwords. From my website, i was chugging along at a low number of uniqes a day - once i started a small adwords campaign ($200 - $100 of my own money and 100 of the promo credit adwords give), not only did i get more visits, but i had more visits even after my credit ran out. I think it gives google a better chance to crawl your site and gives you a little more authority.

Great question John.  This is a problem that most small business owners face.

Sadly, $500 doesn't get you very far these days.  Sure one can spend money on PPC, but when that runs out, where do you go from there?  I would say majority of small business owners do not understand how to choose the best keywords for their campaigns and even if they do, oftentimes their websites are not set up to convert visitors to paying customers.

So I would recommend investing in education and learning about online marketing.  There are plenty of great websites, which offer training courses - Lynda.com and Udemy.com are two I've come across.  Once you understand what options you have, you can make a wiser decision where to invest your marketing dollars.

I found tracking converting visitors quite tough. Often one might find my site through a CPC, and then go away to think about it, come back on another ip with a direct search of my website or bookmark and convert and it doesnt show as a CPC conversion. All i know is, when i throw money into adwords, my revenue does increase for the product keywords im targeting. At this stage of my business im happy to go along with this however i know i need to refine this strategy.

My gut feel is Adwords may work better for Brian than Jo.  There is a market of people out there who are actively researching or looking to buy stools and chairs, and there are some fairly obvious keywords (especially if you add locations).  A new community or marketplace on the other hand is not something people are actively seeking out, and dependent on the niche it may be tough to get the right keywords.

I like the idea of an incentive but agree it needs promoting.

Dependent on the niche, possibly use $300 on Odesk.com to get some web research done finding contact details of buyers / sellers / community members.  (One of my clients just got 700 companies researched for around this amount, including contact names, which you may or may not need depending on market niche).  Then send targeted emails to these companies with all of the offers relevant to each company:

* tell sellers they can list for free.  The only cost to them is time to list and they might get business, so this should get a good response.

* if you have forums run a competition / incentive for the best community contributor before a specific deadline (6-8 weeks from email date).  This helps you get content on the site, which helps SEO in the longer run.  You could ask for contributions on specific topics to try and get specific keywords into the content submitted.  If you make it 'best contributor' it also encourages people to submit / post more than once.  (Hint - make sure you encourage anyone who does contribute by sending thanks and posting responses and so on!)

* give buyers an incentive to register.  Chance to win a gift pack of champagne and chocs, which you can easily do with the remaining $200.  Or a $200 voucher to RedBalloonDays, or something else which suits your target audience.  Extra entry into draw if you refer a seller who also signs up.

If your business model permits you could also incentivise with a discount off first purchase (x% up to a maximum amount per order) for a limited time.  If you can swallow this in reduced margin rather than have to take it out of your $500 budget,  you get more money for your online lead research.

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If your buyers are consumers rather than businesses, you can't research them this way, but it still works for sellers.  One option for this is to find some sites with a demographic which overlaps your target market and offer a reward (CPA, commission on first sales etc) to promote you.  Also make it easy for any buyers who do sign up to refer you.  Social media sharing, as part of signup ask them to let others know about the site etc.

This is a pretty fun question to answer, but it will all depend on what business you are running :) I would most likely take my $500 and use it to advertise my product on a targeted email list (one that has my exact target market) to test my product. If I can't purchase access to the whole list I will most likely ask for a segment. Enough to test conversion rates and lead costs/cost per acquisition.

This effort can hopefully make me enough money to try this same strategy again on another targeted email list :), and it goes on :)