Thursday, April 21, 2005
Online Classified Ads Getting More Action
By Pete Barlas LiveDeal appears to be the
real deal.
INVESTOR'S BUSINESS DAILY
In the five months since its inception, the privately held e-commerce company has made quick strides in competition with eBay, (EBAY) Yahoo (YHOO) and others in the billion-dollar online classified ads market.
In March, LiveDeal says its customers sold $155 million in goods, up from $80 million in January. The site lists for sale about $1 billion in products ranging from cars and homes to computers. It launched in November.
LiveDeal's niche is local markets. The site emulates newspaper classified ads by helping buyers find products for sale in their hometowns.
And
unlike many rival sites, LiveDeal doesn't charge consumer sellers to list
products. Instead, the company charges for premium services such as for
a prominent listing at the top of a page or to post extra photos of a
product. It does collect fees from firms that use the site to sell goods
and services. Last month, LiveDeal paired with AutoNation, (AN)
the leading auto dealer network, to post used car listings on the site.
LiveDeal wants to become an alternative to eBay and others that charge sellers to post items. EBay suffered a backlash from sellers when it raised its fees this year.
With its free listings, LiveDeal has thrown down the gauntlet, says Greg Sterling, an analyst for the Kelsey Group, a research firm.
"The pressure is on other companies to make most classified listings available for free, because that's where a lot of sellers are going to gravitate toward," he said.
LiveDeal is being careful to build a niche of satisfied buyers and sellers, says its chief executive, Rajesh Navar.
"We are taking a different approach because the classified business is huge," he said.
Former eBay Engineer
He expects to open sites in Australia, Canada, India, Ireland, New Zealand and the U.K. by year's end.
And the company is close to signing a deal with a large international newspaper chain to post its classified listings on LiveDeal, he says.
"We have to move fast," said Navar, a former principal engineer for eBay.
Consumers likely looking for alternatives to Yahoo and eBay, and who tend to be savvy, are finding LiveDeal, says Sterling.
"It's not like they really have to educate anyone," he said. "That's why they've been able to ramp up so quickly."
Navar joined eBay, the largest online auctioneer, in 1998. He left in 2002 and hatched the idea for LiveDeal while attending Stanford University.
"I wanted to go to business school, and I wanted to do something on my own," he said.
Consumers can find goods and services by product type and by ZIP code.
Most buyers and sellers live within 50 miles of each other, so many of the transactions on LiveDeal are completed in person.
Face-to-face meetings reduce the chance for fraud and help sell items like cars that are hard to move online, says Navar.
"We encourage them to go have a look before they make a purchase," he said.
Top sales categories such as pets, cars and furniture are better suited for face-to-face transactions, says Navar.
Online classified ads are catching on fast. Online classified ad revenue in the U.S. alone will top $3.7 billion in 2009 from $1.5 billion in 2003, says JupiterResearch.
Yahoo and eBay also have focused on classified.
Yahoo's consumers must pay to post items. Auto sellers pay $24.95 for a basic ad that appears for 21 days. Consumers pay $49.95 for an ad to sell a house.
Craigslist, Rent.com
A spokeswoman for Yahoo declined to comment.
As for eBay, in February it started a classified service known as Kijiji in Canada, China, France, Germany, Italy and Japan.
In August, eBay bought a 25% stake in Craigslist.org, a leading U.S. classified ad site. The companies didn't disclose financial terms. In December, it bought Rent.com, an apartment-listing site, for $415 million in cash and stock.
A month earlier, eBay bought Marketplaats.nl, the leading classified site in the Netherlands, for $290 million in cash.
A year ago, eBay competed its purchase of Mobile.de, the leading online classified service in Germany.
Analysts say eBay will be a force in the online classified market because of its size. Value of products sold on eBay last year reached $9.8 billion, nearly 10 times the amount on LiveDeal.
During an earnings conference call in January with analysts, Rajiv Dutta, chief financial officer for eBay, said buying other companies is the fastest way to seize new markets such as classified ads.
"Our acquisition strategy is always around our core existing businesses," he said.
"And very often we use acquisitions as a way of accelerating entry into a market or accelerating entry into a particular strategy," he said.
Many smaller companies, including Tribe.net and Oodle, compete in the classified ad market. Like LiveDeal, both help consumers find goods and services in their hometowns.
With so many local niche markets, online classified is big enough to support several players, says Sterling.
"The local market is so fragmented and increasingly competitive that it will be hard for a single company to be dominant," he said.