Friday, April 08, 2005

Consolidation of Classified Ad Websites

In the old days people shopped for food at specialty stores. They went to the vegetable stand, butcher, bakery and dairy (or it was dropped at their doorstep). But now everyone goes to a supermarket. They prefer the convenience of a single location.

We've seen similar consolidation in "big box" stores like Walmart, Costco, Home Depot, Frys, etc. It just makes sense. People want to go to one place to buy a variety of things in a certain class of products.

But what about the Internet? Well, Amazon continues to grow their breadth of products. In fact, their pull down menu of product groups even has the catchall "everything else". In the world of auctions, we've seen the same thing with eBay, which promotes itself as "The World's Online Marketplace".

One could make an argument that on the Internet, a specialty store is just a click away so why is a big box webstore more convenient than these specialty shops? Very simple, every new webstore requires that the user register for an account, enter their billing, shipping and credit card information. It's a pain.

Webstores also improve with age. The more you use them, the more they get to know your interests, your preferred shipping method, your list of friends (from gifts you send them), and much more. This further streamlines the user's experience.

There is also the issue of trust. If you have a good experience buying a book, you'll trust them to sell you a DVD and ship it in a timely manner. Once a webstore earns your trust, you want to buy other stuff from them as well.

The bottom line is consumers want to be able to get everything they want in one place.

So, what does this mean for classified ads? Well right now, you have a few consolidated websites like Craigslist that address everything. But the majority of the classified activity is still on the vertical sites like Monster, HotJobs,, Autotrader, etc. Why is this?

Well it's simple, the vertical websites provide a much more professional experience that is tailored to their specific vertical. When an advertiser enters information on the vertical websites, they do so using a form that is customized for that vertical. This approach has two distinct benefits: (a) by prompting the user, they elicit more complete information than a simple textbox; (b) the resulting data is now structured and searchable by field.

Let me illustrate the issues described above. Look at some of the car listings on Craigslist. Do they include the transmission type, interior material and color, a description of the stereo system? Most of the listings in Craigslist are incomplete. Compare this to the typical listing in any of the vertical automotive websites. The verticals are far more complete.

In addition, the verticals are easily searchable. You can search under "model" for the term "corvette" and the search results are all corvette cars. Try searching for the term corvette on Craigslist and you'll get parts, services, cars. You'll get some guy selling a Mustang who claims it is "faster than a corvette". This is because the information in Craigslist isn't structured.

Craigslist is great for people with what I call a high time-to-money-ratio. But on the other hand Craigslist does provide a cool single integrated solution that fosters cross-pollination between the various categories.

There is really no technical reason a site cannot be built that combines the single integrated classified ad experience of a Craigslist with the structure and context of specialty sites. I don't want to make this a commercial, but this is exactly what drove me to start my company.

This isn't to say that ZiXXo will dominate the classified ads business. I fully expect the newspapers, Craigslist, eBay and others to follow this same model. Hell, it just makes logical sense, why wouldn't they? My real premise here is that the vertical classified ad websites have a limited future if they remain standalone solutions. Either someone will pull an "InterActive Corp." on these sites and roll them all up into a single solution, and Yahoo has already started down that path, or they will be squashed by a company that delivers a big box environment with a vertically specialized user experience.