Kitmondo.com

$50bn by 2009

by Richard

I've just finished reading Guy Kawasaki's excellent "The Art of the Start" and, amongst plenty of other good stuff, is the following:

Every - literally every - entrepreneur shows up at Garage with a pitch that has 3 or 4 slides that "prove" the size of the market. Usually the slides contain a quote from a well known consulting firm such as Gartner, IDG, or the Yankee Group stating unequivocally that the size of the "shrimp-farming software market will be $50bn" within the next 4 years. It's a funny thing about these slides:

• Every market is going to be at least $50bn
• The forecast is 4 to 5 years in the future...short enough to make the forecast available, but long enough so that it is not provable
• No one in the room, even the entrepreneur, believes the numbers or thinks they are relevant

Having recently revisited some of the business plans I've been involved in over the years, it's uncanny how many of them feature a sweet little Datamonitor/IDG graph showing market growth hitting $50bn in a few years time. Had to laugh...

What's in a Word?

by Richard

We've moved from Alpha to Beta.

Loads still to do but I feel we've made more than just a symbolic step forward today. The site's starting to hang together well and some of the more challenging technical issues are now behind us. We aren't scaling the heights just yet but maybe we've packed our tents and are leaving Base Camp 1...

eBay and Skype

by Richard

A report on Silicon Beat suggests that eBay is talking with Skype about a takeover. It may be hot air - Skype and its investors have recently been quite vocal in denying it's available for sale (which, naturally, is a reasonable indicator that it probably is). But, assuming it is true, the obvious question is...WTF? What is the world's largest consumer auction site planning to do with the world's largest VOIP app?

Better minds than mine are trying to figure it out - see Techdirt, Rob Hof at Business Week, Fred Wilson.

Here's my take...

Although ebay wouldn’t necessarily admit it, several of their categories (mostly in the capital equipment sector) do not perform well within the auction format and are effectively used by sellers as classified advertising platforms. Sellers in these categories use eBay for distribution, hoping that buyers will find their listing, make contact and potentially close a deal outside the auction.

The cost of placing a listing/advert on eBay is high compared to other classified sites, and sluggish growth in the US might suggest they’re starting to feel some price pressure. If this is the case, they may well be anticipating erosion to listing revenue by introducing paid “call me” features to run on each listing and to be premium charged to the sellers each time a buyer makes contact. As previously posted, generating revenue from buyer:seller interaction (rather than the promise of interaction) is a GOOD THING for the classifieds business.

Paying $2-3bn for Skype would be an expensive way to acquire this technology so clearly there must be further motives at work but, as with PayPal, I would anticipate the motivation to be “what can Skype do for eBay” rather than “what can eBay do for Skype”.

Album of the Week

by Eric
The standards done with individuality - oozes class.

"his sizable voice filters Louis Armstrong through Ray Charles and Dr.John"  NYT

Back to the future

by Eric & Richard

A matter of 15 years ago, some of us at Kitmondo who were then involved in the sale of used computer equipment, had a bright idea. As with all good ideas this sprang directly from a perceived need in a marketplace we were familiar with.

Although there was an active used computer market, there seemed to us to be a lack of knowledge as to what the uniform value of the equipment being traded really was. For much of the time dealers, auctioneers and brokers in the used game literally traded on their intuition. One of the main sources of used equipment, leasing companies who were re-assuming ownership at the end of a lease or at default, were particularly exposed, as generally speaking they didn’t have a clue. Worryingly for them, this lack of residual knowledge often impacted on their ability to write good business in the first place, which in turn led to some spectacularly ugly insolvencies during the 90’s.

Thus was born a quarterly review of used computer equipment which we published and which ran a little along the lines of the guides to used car prices. The publication was sold on an annual subscription basis and covered everything from a Compaq luggable to an IBM 3090. The basic information collated and laid out showed a full description, year of manufacture, original price and, in our opinion, what it might be worth on the used market at date of publication. It was probably very primitive at the time and what was even more primitive was the work involved in publishing it. None of us involved realised how much time it was going to take up. We had formed what the modern day poll analysts would call focus groups in each category of equipment and we polled them by telephone to try to determine what prices things would be fetching at the time we were due to publish the next edition. Every piece of equipment in quite a thick little publication had to be edited on a word processor before being sent to one of the only people in London who knew how to use PageMaker.

This was our first step into the classified business 15 years ago. When we compare it to the scope of the opportunity  we are building here at Kitmondo, we wonder how on earth we did what we did all those years ago, before the wheel was invented. 

Will the ghost of Charles de Gaulle send the shivers up Google and Yahoo ?

by Eric

An interesting story is emerging from France about calls from the French President, Jacques Chirac, for the development of a new European internet search engine. It appears that Chirac believes that Google and Yahoo represent the latest of a long line of American/Anglo Saxon incursions into the culture of Europe. The response he calls for takes the form of the joint development by French group Thomson and Deutsche Telekom, of a brand new search engine.

This should not be looked upon as an isolated incident that is difficult to reconcile in this age of internationalism in technology. Since the formation of the 5th Republic with Charles de Gaulle as President, France has periodically been anxious to develop its’ own institutions to avoid what it saw rightly or wrongly as the danger of being reliant in important areas on the American/Anglo Saxon axis. So this latest attempt by Chirac to avoid what he sees as the internet dominance of Google and Yahoo has to be looked at in relation to his political upbringing in the De Gaulle presidency.

Charging

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.