Abstract: Off- and online classifieds business models are based on selling access to a scarce resource, readers. While classifieds aggregators (like simplyhired, Oodle and others) do deliver free traffic to those sites, it isn't nearly as valuable, as it the value-generating property (scarcity) is stripped off: Those users would find the ad through any different site, too. However, blocking aggregators would be short-sighted, since even a market leader would be bound to only loose market share over time. The era of selling vanilla ads to scarce audiences will be over sooner than many wish, the base cost of publishing ads vanish. This leaves a huge gap in monetization and the key strategy to capture this money would be to base the value proposition on something one level up the stack of hosting ads. The article quickly discusses a few such ideas. Further, it seems like providing a strong API, i.e. helping the aggregators, would be a smart move for these sites, as this would spur necessary innovation and most importantly keep power-concentration at the aggregator sites in check.
Recently, a number of startups tackle the aggregation and search of classifieds over multiple sites. Switzerland will see its share coming, too, as in the beginning of this year a landmark court decision cleared the cloud of uncertainty behind this model -- interestingly one of the suers (tamedia) was the first larger company to launch such a site, piazza.ch.
Naturally, the classical classifieds sites are wary on the situation. The aggregators argument is, that the classified sites are profiting themselves, because they get traffic for free. While this is certainly true, the argument is also a bit disingenuous, as the aggregators move themselves into an interesting position, and this with relatively little effort. An interesting position, because they're the ones who can capture most of the user's click flow and slowly gaining market position to sell advertising or even premium positions in the result list. In essence, they say "we give you free traffic to your classifieds but want to show the search results page in exchange". And Google demonstrated how financially interesting that page is.
That said, the current classified sites have not been very innovative with their results page. The business model is just an almost 1:1 copy of the offline model, money is being exchanged for exposure to an exclusive (scarce) audience. The offline model has the audience' scarcity built in. The first wave of the remaking of the classifieds market was that the audience moved online; the roles of offline publications replaced by online destination sites. Newspapers lost market share by clinching too long to their old, profitable offline business. But all in all, not much innovation has happened in this market, surely not much was driven by the fact that we're online (except for the convenience to reach the site, of course).
The aggregators are removing the scarcity, the traditional reason for paying for the ad. In principle you can put your ad on the cheapest site that is being crawled, that is the price will quickly plummet to zero.
A rather ignorant reaction of a classified site could be to technically block all kind of spiders (Craigslist did, but apparently more for technical reasons). While that would slow the proliferation of aggregators, smaller sites would still be happy to be crawled. At the very least when the big portals start in this business. A market leader site would retain their scarcity for the moment, but would be bound to only loose and loose market share over time. This model is not sustainable.
As a classifieds site, a simple answer would be to jump on the bandwagon. Use your brand recognition to have a head start in the search business, and show your own customers at the top of the result list - the most obvious monetarization scheme. In fact, the launch of piazza.ch here points in exactly to that direction and several job sites have been doing this forever. The elephant in the room here being the question wether a half-hearted approach, especially regarding the ranking, will be strong enough against new sites, that focus on being an aggregator. Remember, the barrier of entry for starting in that market is low and getting lower. Have a good idea? With almost no investment you can try it out. The signs of a market ripe for a lot of small innovations. Maybe we will have thousands of aggregators, all catering to small niches. Why not, indeed? And while these innovations happen, the classified site following the aforementioned strategy is stuck with essentially the old model, this time with audience scarcity created artificially in the ranking, while simultaneously giving up all other differentations towards other sources of classified ads.
Another option would be the move the value away from exploiting the scarcity of audience and/or attention and create it with something else. What is clear is that the prices for an ad are often marginal for the advertiser anyway, thus there is still a lot of money on the table, even a chance to recapture what was lost in the dwindling print market. What are the possibilities?
Service comes up as natural example. Maybe service in publishing the ad, making this ridiculously easy ("just send in your item, we'll photograph and describe it and send you the money when its sold". There are companies doing this for ebay). Make great ads, compete for highest conversion of lookers to buyers. Or good integration with backend systems. But most interestingly by handling the life and afterlife of the ad. Many types of ad are just there to look for the first and only customer that is willing to pay. All other leads just cost money if not properly redirected. The used car salesman will probably take any lead anyway, but if you're renting a flat for a predetermined rate, any affluent enough tenant is good enough and showing the flat to 20 people is only a cost factor. Find ways to qualify leads, automatically take the ad away when a good lead is found and maybe even monetize surplus leads in novel ways? That would be something that wasn't really possible offline!
A good neighborhood would be another possibility. Become an umbrella brand for trusted/valuable/.. ads. Become a label! I remember an old statistics of isbn.nu a price comparison engine for books. While amazon.com almost never had the cheapest offer (rather, they were in the middle of the field), they still got the most sales - by a large margin. Sure, many factors specific to e-commerce retailers play here, but one could imagine a brand for ads, established a firm standard for who can advertise, that translates into a trust that boosts the quality of leads significantly. Or have a trust system specific to your site. Ebay and craigslist lead here in their specific ways, but not much is seen here from traditional players.
In all these models, the increased circulation is really a blessing and the sites would be well served by making the work easy for the aggregators. Publish the ads in RSS feeds, maybe even additional APIs. By using something like feedtree you can offer an up-to-the-minute current feed at virtually no additional cost. Enable the market of new and hopefully innovative aggregators.
In fact, lowering their barrier of entry even further helps level the market lest no one single aggregator will come powerful enough to demand money for very current crawls or something like that.
It also enables a forest of mini sites, tailored to very specific audiences. A single parent community website maybe, that marks out neighborhoods with fellow members? An exclusive programming languages website, happy to point to job offerings for their favorite language.
To wrap up, just a quick example of how such a strategy could help a whole industry get out of the lock of a near monopoly comparison site: In Switzerland, every year the new rates for health insurance are published on the same day. Many, many people flock to comparis.ch, the leading comparison site. Their lock on the market is so strong, that they can demand high fees for every lead and dropping out of their engine is not really feasable for an insurance company. Although some smaller and actually cheap ones are actually not included, but few people know. One of the larger insurance companies, CSS, built their new price calculator around web-services. What if they would open it up, establish it as a standard and most other companies would follow suite? Creating a site more powerful and more complete than comparis would be of the order of an assignment for a CS student. The lock of comparis could quickly crumble, saving the insurance companies the fee for the lead, maybe giving it back to the customers.
While probably a bit harder to see this in the classifieds market, my guess is that a healthy transformation of this market could be driven by similar patterns; and surely there is still a lot of money there, you just have to figure out how to create value worth it. In any case, we are entering a phase of real innovation in this field, with interaction models and business models beyond almost direct translations of the offline world.