The Future of Online Classifieds

Event: Kelsey Group Drilling Down on Local Search 2005

Session Title: The Future of Online Classifieds

Session Date: April 20, 2005

Session Time: 10:30 am – 11:15 am

Session Description:
Classified advertising is a multi-billion dollar market, which is moving online. The rise of the Internet as a source of local classified listings and a range of new classifieds providers (many of them free) are putting pressure on traditional publishers, especially newspapers. Does the future of local classifieds reside in classified search sites such as oodle.com, local marketplaces like Craiglist, vertical sites or highly targeted communities that offer contextually relevant listings? The panelists, who represent a range of new classifieds sites, will discuss their models and where they believe the overall market is going.

Session Participants:
Craig Donato, CEO, oodle.com
Konstantin Guericke, VP, Marketing, & Co-Founder, LinkedIn
Mike Hogan, CEO, ZiXXo Inc.
Peter Krasilovsky, President, Krasilovsky Consulting
Rajesh Navar, CEO, LiveDeal
Mark Pincus, Founder & CEO, Tribe.net

Related Posts: buzzhit!’s Drilling Down on Local Search 2005 Index Page

Session Details[*]:

Q: Offline classifieds, dominated by newspapers, is a multi-billion dollar industry. Do you see classifieds moving completely online, if so when, and economic impact

Krasilovsky: Aside from Craigslist, classifieds are being verticalized. It’s all moving online

Q: Then do newspapers become second tier?

Pincus: This is really about the need for a consolidated local marketplace. We’re fooling ourselves if we think newspapers are in danger near term; they’re the only ones who have consolidated the local marketplace. It will all move online; the question is who will provide it… newspapers are well positioned.

Donato: It’s moving online quickly; classifieds are better online… you can add pictures, more words, searchable. Superior experience.

Hogan: The experience is so much richer online. Easier to do research online. There will be segmentation, but the meat will all be online

Navar: Online you can provide free listings; you create revenue via PPC. Newspapers won’t disappear, but what if classified revenue goes from $17B to $7B…

Q: There’s been lots of organic classifieds, people putting “Garage Sale” on a telephone poll

Pincus: 85% of classified selling goes through non-traditional media (i.e., not commercial). Online represented 2% [2002 numbers]

Guericke: Monster drove 2% of job placements vs. 34% by employee referrals [ed: for a specific agency, name missed]

Navar: There is an opportunity to grow the market. Offenses need an offensive play; must partner with a technology play, leveraging distribution and cash flow

Donato: The fundamental business model, upfront fees, is being undercut by players like Craigslist. Big players like Yahoo are entering the market

Q: Will all online classifieds eventually be free?

Donato: A basic online listing will be free; upgrades will be available. Print will be an upgrade. But probably all P4P based.

Pincus: It seems fairly obvious that every classified site will have something free, and tons of aggregators (search engines) will aggregate everyone. Just like search engines, you’ll be trying to optimize for free (SEO), but there will be upsells available (PPC).

Donato: I think the current pricing model alienates folks, driving them all to Craigslist. C-2-C will all be free (rooms for rent, etc). You can’t afford to alienate whole segments if you’re going to be a big player

Guericke: People get flooded with resumes when they put a job out. Crossing with social networking creates referrals, allowing employers to winnow. Listings will be a commodity; value added services will be the difference.

Hogan: The basic classified listing will be free, and it will get more and more rich: pictures, video, etc. Everything is free, but rising above the din will cost [Ed: essentially what Pincus said]

Navar: Ultimately it comes down to perfromance. [Ed: Essentially advocates a CPA approach]

Q: At Zixxo, I noticed that there’s something called an ISR (Independent Sales Rep). Can you explain that, how it’s working, why it’s right

Hogan: We believe that word-of-mouth is critical. The local rep is feet on the street. Local businesses don’t want cold calls; they want someone to explain it to them. We do have a self-service model, where we’re making it easier and easier. And of course, social networking is another interesting tweak on this. The ISRs are performing, but it’s very much a chicken and egg situation.

Q: Network vs. being a destination site. To what extent are you predicated on being a destination site vs. distributing listings out to the Internet to be found… and how does the network effect your brand?

Pincus: What I said in the Fall was that we were being pretty insane in the industry; that we shouldn’t be competing with each other. My point is that it’s assinine to try to win on being a brand people know to come back to, to building a sales force. If you’re InsiderPages or Judy’s Book, you should be a Web Service, so that others like LinkedIn could just access them instead of having to build their own. From our perspective, we’ve built a lot of these things because we’ve had to. We’re very open to sharing our technology and users; the platform we launched yesterday has that in mind (it can integrate everyone elses stuff). People can plug in the best photos, invites, etc. You’ve gotta decide what piece you want to be in the puzzle

Guericke: For LinkedIn, in order to compete you have to give away something free that isn’t available elsewhere. For us, that’s connecting with clients.

Navar: Distributors would be a great partner for us. When you’re a destination site you have to worry about other stuff, consistent experience, etc.

Q: Peter, you’ve been noticably quiet…

Kraslivosky: AutoTrader says no way am I going to let oodle.com aggregate me. Craig, what’s the answer to that

Donato: If you’re in the business of taking classified listings, you’re rep’ing a seller. If you’re turning down traffic, you’re doing the seller an injustice. Inventory is fluid. Search for classifieds is important to help classifieds grow because it helps the buyer. If anyone thinks they can be the one-stop shop, they probably don’t want to work with us.

Pincus: Craig, I think there’s a real question you’re going to have to answer… I totally agree that an industry level there has to be an exchange… whether it’s a company or a standard… but the question is… when you start to stick a brand on it, that you want people to come back to, it makes it unclear. Sure, LiveDeal would love to syndicate their listings, but not if its to a branded site that wants to get that customer to come back to them yet.

Donato: If I can provide qualified prospects to folks, I’m not sure that would be a bad thing.

Navar: Craig, I think you have a different chicken and egg problem. eBay wouldn’t use Google 5 years ago. Maybe you need to commit that within verticals, you’ll have to promise you’ll never be a listing service

Audience Q: Google and Yahoo are going to offer free classifieds; doesn’t that destroy the business, and… doesn’t that just beg for more and more of it to be free?

Navar: Just because someone has the traffic doesn’t mean they can do everything.

Pincus: I’d add… why has Craigslist become such a force. I think the reason that has happened is because Classifieds are about longevity and brand. Building the better mouse-trap won’t get you anywhere in 12 months. It took Craigslist 9 years. People only use classifieds a couple of times a year; you use Craigslist because a friend had a great experience with it.

Q: Final thoughts…

Guericke: Network effect is critical on the Internet. Technology is a commodity. [Ed: We understand what he meant, he just said it wrong] You have to differentiate to charge

Krasilovsky: I have a lot of confidence that you’ll be able to upsell people. Newspapers get 45% of their classified revenues from upsells (extra pictures, etc)

Navar: I don’t believe there’s time for 10 years of trial and error, which is what’s happened so far

Hogan: In response to Yahoo or Google entering the market… their brands are associated with one thing. People don’t explore around beyond that; people want best of breed. [Ed: $350MM in free cash flow reinvested into their current products, YOY, will move them toward best of bread across the network…]

* These are raw, unproofed notes taken in real-time. Nothing attributed to any speaker should be assumed to be an exact quote. Rather, my goal was to capture and communicate the essence of what was said. If there is a significant mistake, please post a comment or email me; I will make a correction at my earliest opportunity.