Wednesday, February 15, 2006

Online Classified Ads - The Next BIG Thing

I read a very interesting article recently in the January/February issue of Business 2.0 (http://www.business2.com).

The article was called “The Big Guns Next Target: eBay” by Michael V. Copeland.

The article compares e-Bay and several up and coming e-commerce marketplaces.

The current leader: e-Bay (http://www.ebay.com).

The challengers: Google Base (http://base.google.com) and Microsoft Fremont (http://fremont.live.com).

According to the article, e-Bay is currently the largest (90% market share) online marketplace with 40% annual profit growth between 1999 and 2004.  If you’re looking for a deal or for special, hard to find products, you should be checking e-Bay.

However, the article also points out that even though e-Bay revenues for 2005 in the US are projected to be $1.7 Billion, that market is still dwarfed by the OFFLINE classified ads spending for 2005 in the US of $27 Billion.

Also, from the article: “at current growth rates, listings traffic could surpass that of auctions within four years” and that online classifieds are “the format that many analysts think will define the future of e-commerce”.

Is it any wonder that Google and Microsoft want to leverage their expertise in online advertising and search to build an online platform for classified ads?

Both these companies have serious experience already with pay per click ads and web search.  Certainly Google is the dominant player with its web search and Adwords and Adsense programs.  But Microsoft also offers MSN search and their own pay per click listings.

If you’re not familiar with Google Adwords or Adsense here’s a quick description of each:

Google Adwords – Allows advertisers to bid on certain keywords or keyword phrases such that when someone searches for those keywords on the web, their advertisement will show up along the right hand side of the search results.  Whether your ad is displayed on the first search results page is a combination of how much you pay and how popular your ad (i.e.. how many times people click through to view your ad).

Google Adsense – Allows content providers (e.g. blogs or article directories) to display Google Adwords ads on their webpages.  Google allows you to tailor what type of ads are displayed on your page but the ads must be related to the content being displayed on that page.  If consumers click on one of these ads, you make money for displaying it on your web page.

Google also allows you to configure what regions of a country and even what countries your ads are displayed in.

So the combination of web search and ads which are highly related to the content being searched or the content being displayed mean that the ads are highly targeted to consumers who are interested in that topic.

Now, both Google and Microsoft want to expand their technologies to support online classified ads that are easily searchable with highly targeted search results.  This is something that e-Bay is currently unable to do well.

Both Microsoft and Google have the financial and technical clout to create these online classified marketplaces and a backing e-commerce platform from which to sell products that are advertised in those classifieds or that are related to searches done on those classified ads.

Google has already launched Google Base in November of 2005 and Microsoft expects to launch their Fremont service around the middle of 2006.

How will e-Bay be impacted by these new services?

It’s too early to tell.

As a marketer, the best thing to do is to figure out how to advertise using all three services.

Also I see some great business opportunities created by the launch of these new services:

  • In the same way that there are people selling information products about how to sell stuff on e-Bay, there is a real opportunity for someone to get on board the Google Base and Microsoft Fremont services early and create the same type of information products for those services.  

    Note: Not just writing an e-book about how to sell on these services but also full blown multi-media products that describe, step-by-step how to get up and going with these new services. 

    Some of these products would definitely be Big Ticket.  You can have an e-book as a lead generator and sell the multi-media package as the back end product.

  • Create a business that offers to sell or market people’s products on e-Bay and these new services with great results for a portion of the proceeds of each sale.

  • Pick a niche (e.g. cars) and specialize in selling those via the classifieds or in telling other people in the niche how to be successful selling in that area using these new services.

  • Launch your own classifieds site on top of Google Base or Microsoft Fremont and sell to a niche market. (At the time of writing, I don’t know if this will be possible but it seems like something that they could allow).

  • Have a service that monitors all online classified ads or marketplaces for products or items of interest and send alerts via email or chat to people. 

    This might be a free service supported by pay per click ads or other advertising sent to the subscribers of the alerts.

    Or you could charge a small monthly fee that consumers would be willing to pay so that they can have all three marketplaces monitored on their behalf rather than having to check each individually.

I called this article Online Classified Ads – The Next Big Thing.  Online ads have been around for a long time.  But the new services provided by Google  and Microsoft really open them up to a much broader market than was previously possible.  Hence the Next BIG Thing :-)

I hope this article gave you some great ideas.  If you’ve got comments about these ideas or what you’d like to see covered in this blog, please leave a comment for me.  I always like to hear from you.

-Chuck

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