by Richard
When we were developing the charging model for Kitmondo we looked at several different scenarios:
- no ad/listing charge but contextual advertising (e.g. indeed, oodle)
- fee for posting an ad/listing (ebay, monster, loot)
- monthly subscription fee (labx, powersource)
- fee for enhanced membership services (alibaba)
- transaction fee (ebay)
- cost-per-lead (reply, autobytel)
From time-to-time we’ll use the blog to take a closer look at each model and monitor the success of some of the businesses involved.
The companies in the first line would, on the surface of it, appear to be in the weakest revenue position. As aggregators of ads from other websites, they have no direct relationship with the advertiser, relying solely on reselling traffic to Google and Overture. This clearly restricts their ability to upsell services to advertisers and exposes them (theoretically) to the whims of the sites they index.
Paradoxically of course, the lack of a direct relationship with the advertiser is the very reason these businesses can achieve a competitive advantage. Since they can aggregate the listings of several sites at once, they can create sell side liquidity virtually overnight. This enables sites like Indeed to focus their energy on attracting buyers (in their case jobseekers) to a site that already has a very liquid supply of sellers (employers). Additionally, because their sellers often don’t know they’re even listed, they don’t suffer from advertiser fallout if there is a lack of buyer activity.
A compelling proposition in the classifieds business….
(The investment industry appears to agree with this. Fred Wilson posts about why his firm has invested in Indeed).
Nevertheless, the barriers can be pretty low in the aggregation business so, beyond winning the race for traffic, these businesses will presumably need to develop more defendable sources of revenue in the long-term. An interesting consequence of this might be that sites turn their attention to the buy side of the classified equation e.g. a job site earns its money selling enhanced search and cv management services to jobseekers. Undoubtedly, persuading buyers rather than sellers to part with cash represents a heck of a flip to the classified model but, if the market is telling us anything at the moment, it is this...expect the unexpected.
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