It’s taken some time, but the price of a basic online classified listing
will soon be free.   A number of prominent players in the classifieds
industry have begun to embrace this view by offering free listings to their
customers.  A few months ago, eBay rolled out free classifieds
internationally as part of its new Kijiji
service.  Yahoo recently launched free classifieds in over 20 categories for
private party sellers.   Tribune just launched free classifieds in 6
cities under its Recycler brand. 
Now Knight Ridder is offering free online classifieds in 22 of it 27 markets. 

There actually is a business model for free

The good news is that the cost of an online listing is near zero.  Using
a self-serve model, fulfillment is free and the incremental cost to serve the
listing (i.e., bandwidth, servers) is almost free.    This, in
combination with the tremendous success of Craigslist, makes it increasingly
hard to ignore this downward price pressure.  What’s needed is confidence
in a revenue model for free listings. 

I believe that an upgrade-based model will soon emerge.  In this model,
the free basic online listing will act as a starting point.  Instead of
spending marketing dollars looking for advertisers, a classifieds provider will
have clients coming to the front-door for free.  The sales challenge will
be in convincing them to buy “merchandising” upgrades that will make their
listings more effective.  These will include listing upgrades ( e.g., in
the case of a real estate listing, a virtual tour), power seller upgrades
(e.g., features for car dealers that wants to easily upload and monitor scores
of listings); placement upgrades (e.g., option on how and where the listing is
displayed, including placement in a print publication).  The cost of these
upgrades will be based on performance – i.e., the more effective they are in
helping sellers, the more they will cost.   

This type of model also better supports pricing segmentation.  A
classifieds provider can simultaneously meet the needs of both professional
sellers as well as private party sales.  A restaurant may only elect to
place a free job listing for a dishwasher (or a person with a room to rent) but
the hospital looking for RNs (or the landlord for an apartment complex) will spend
money to generate more effective leads. 

Free changes everything

Free classifieds listings also do more than create a widespread change in an
industry business model. More significantly, free classifieds serve to increase
overall consumer usage of the category. When listings are free, consumers use
them a lot more often.   This is especially true with merchandise for
sale.   Thinking about selling or promoting something — why not list
it?

This entry was posted on Wednesday, May 25th, 2005 at 11:21 am and is filed under Uncategorized.