eBay Imports Kijiji: Good Idea, Tough Competition

First, the good news: eBay has finally decided to go into a business that makes strategic sense (instead of buying random phone companies and social-web-surfing companies).  Kijiji's classified ads are highly complementary to the company's core business, and they allow the eBay to use its core expertise of helping people buy and sell stuff.  Kijiji US also provides the company with a hedge in case Craigslist and other free listing sites begin to cannibalize its paid eBay listings.

Despite significant online classified efforts, moreover, the classified opportunity remains massive: The dying newspaper industry still rakes in tens of billions of dollars a year for printed classifieds--a less efficient, less informative, less convenient, more wasteful, and more expensive way to buy or sell products.  In another few decades, when the current (and last) generation of hard-copy newspaper readers dies out, printed classifieds will seem as archaic as whale oil.  The newspaper companies may be able to retain some classifieds business as it moves online, but given the success of Craigslist, Monster, et al (and the seriously weak newspaper efforts thus far), this percentage will likely be small.

Alas, there is also bad news about eBay/Kijiji.  First, Craigslist is about as dominant in general classifieds as eBay is in auctions, and both businesses are subject to the same network effects.  (If the potential buyers for your product or service are searching Craigslist, you'll put your ad on... Craigslist.)  Craigslist is also free, which is a hard price to compete with.  So Kijiji has some seriously tough competition.

Second, Craigslist is run by socialists who appear to have no interest in turning it into a real business.  This means Craigslist is likely to be free or near-free in perpetuity.  And this, in turn, means that if eBay ever tries to make Kijiji US a real business, the few buyers and sellers who ARE using Kijiji will probably laugh all the way to Craigslist.

Third, as ancient Internet observers will remember, "free" isn't always the best business model for an online listings business.  (eBay proved this in 1997-1998 when analysts were convinced that a free auctions service from Yahoo would put the company out of business).  The major flaw of Craigslist, one that opens the door for competition, is that it is overloaded with crap.  If eBay/Kijiji were emphasizing listing quality, seller reputations, or some element missing from Craigslist, the competitive story might make some sense, but right now Kijiji's problem is that it has NO crap (or any other listings).  And it's hard to see how "Just like Craigslist--except no listings!" is going to carry the day.

Comments

[Joe Zekas]

Craigslist's shortcomings are almost too numerous to catalog - and no one probably understands them better than capitalist Craig's 25% shareholder.

Craig has a narrow demographic, for starters. He encourages the presence of fraudsters to build bulk - a fatal weakness vs eBay's trust facilities.

I believe there's plenty of evidence to support the proposition that Craig is a hard-core, cynical capitalist who can barely contain his laughter when people as sophisticated as Henry Blodget fall for the Saint Craig routine.

[Gen]

"I believe there's plenty of evidence to support the proposition that Craig is a hard-core, cynical capitalist"...

Joe Zekas- why don't you show us that "evidence" yourself if there is "plenty."

[CashForFlow]

Craigslist isn't completely free; otherwise it would have to attract donations every year like Wikipedia. Last I remember it charges a small fee for a narrow range of listings. Due to Craigslist's popularity that small category can easily fund its operations. eBay could do something similar in stupidity. Craigslist is just a poorly run company with a lot of potential. Entrepreneurs seeking profits, and not charity, is the best way to help humanity and Craig doesn't know it yet.

[Joe Zekas]

Gan,

You ought to be able to find satisfactory evidence on the face of the site itself.

I believe there's only one possible explanation for Craig's repeated failure to police the wholesale bait-and-switch and fraudulent behavior that goes on in certain areas of Craigslist.

Take apartment rentals in New York as an example, and look at the history of that category and the behavior of the brokers.

It isn't hard to figure out a strategy to choke off the fraud that occurred year after year on Craigslist. Craig's response: hand wringing and purported cajoling and eventually using payment as a policing mechanism.

Over time community pressure builds on Craig to police a category by charging for use of it. That pressure builds because Craig takes no effective measures to protect his so-called community from the predators that romp freely throughout it. Those measures are readily available. They're not taken because money is the real goal, acquired in a way that's acceptable to the community.

What a world - the suckers applaud your greed.

[PTRADES]

Hmmm 25% of craig must not be doing the trick---hedging the hedge?

[Tony G]

Actually, in the day or so the site has been opened, there are already 1000's of listings. I think Kijiji will be a formidable competitor to Craigslist. Plus expect integration of Skype and Paypal to make executing transactions even easier. I'm looking forward to it.

[outrage]

"Second, Craigslist is run by socialists who appear to have no interest in turning it into a real business."

Please tell me in what universe craigslist is not a "real business". Especially coming from you, Mr. Blodget, who shilled dozens of bullshit businesses
so that your employers (and you!) could rake in their fees, etc.

If you want to talk about fraud, talk about google's click fraud fer crying out loud! Do some research and learn about the fraud networks...

Disgraceful...

[Vincent Primo]

eBay should grow their presence in the industrial space.

GlobalSpec would be a very good addition. It's an Industrial directory with a massive database of specifications. It's not e-commerce per se but it's a website that a lot of people use before making a purchase.

[Mark Glaser]

Henry,
This argument doesn't make a lot of sense because Craigslist is 25% owned by eBay. So eBay's Kijiji is essentially competiting with eBay's Craigslist. I also don't buy into the one-company-dominates-all mentality for online businesses. Yes, there is a network effect for eBay in auctions and Craigslist in classfieds, but there are plenty of ways competitors can nip around and eventually overcome those advantages.

[outrage]

Sigh.

Craigslist is an illiquid investment, because those filthy commies won't cash out and give Mr. Blodget's former cronies their money.

I'm not sure what 25% ownership even entitles ebay to -- they can't vote for squat, they probably don't get any dividends (not sure how/if CL distributes its retained earnings, because they're private). 25% probably entitles them to little more than financial statements.

ebay's ownership is effectively an insurance policy in case CL has a liquidity event, and it was sold because the employee probably was sick of working for salary -- not necessarily because of CL's alleged shortcomings.

If ebay can create a "competitor" and sell it or otherwise dispose of it, they may be able to make more money that way. Even if the competitor is awful compared to craigslist. I'm sure they would prefer craigslist to have a liquidity event, but besides that, they aren't working against themselves at all!

Get it? Sometimes I wonder if you people all live in your parents' basement or something...

[Victor]

Spot-on henry, Craig Newmark is pink all the way down to his underwear. You can see the lack of entrepreneurial drive by the complete dearth of development of craigslist. He's lucky that there's somewhat of a network effect in place for his business because any number of two-bit competitors could knock-up a more fully featured site over a weekend. One day craigslist will be crushed. Maybe not today or tomorrow, but it'll happen soon because craig newmark has zero ambition

[TallTroll]

1) If CL is "crushed", do you think CN will care? I doubt it - in fact I suspect he'd PREFER a return to the "good ol' days" when it was only a few Bay Area hippies swapping bongs and finding places to crash

2) Actually, "lack of ambition" may be CLs' best defense. For all the "ambition" that certain online companies have exhibited, there's been a notable lack of achievement. The outfits that tend to do best are the ones that just do what they do, and don't worry too much about developing a 5 year uber-strategy - because that's mostly bullshit to give Wall St the warm'n'fuzzies

MSN has to be the prime example - more ambition than any 3 other companies, more resource than some continents, almost no performance

[Moses]

One thing to note about classified sites is that the network effect operates in specific localities. When you want to rent a home in LA, you don't care about how many listing there are in NY. This means that Kijiji is really competing against Craigslist in each separate city / town. It's possible for Kijiji to become a nice business by dominating the cities where Craigslist has so far not generated much volume.

Separately: eBay is now in the business of running a "casual encounters" section. Did anyone tell Meg?

[Victor]

Ron Paul has more money than McCain. Take that socialists!

http://blogs.abcnews.com/politicalradar/2007/07/ron-paul-tops-m.html

[Muthu]

I strongly agree with your article. I used Kijiji for staff's selection of my company, I really amazed by the result.Though I'm listed my ad in some other classified sites too,but most of the good numbers of relevant applicants came via Kijiji..They're very good maintaining in database,I really impressed by their service.
Replacement Windows Norfolk

[Brandon Mintern]

I find it quite entertaining that some people just don't get that money isn't everything (mostly in response to a couple commenters above). Not everything has to be a get-rich-quick scheme that rewards people who do nothing more than play with money (investors). What's wrong with focusing on providing value and taking in a more-than-steady ($25M) income? As long as he is living comfortably and enjoying life, while providing the Internet community with a valuable service, what more can we ask for?

I would be quite happy to be in Craig's position. He has built a site which works, requires very little maintenance, and has scaled well so far, all while steadily increasing yearly earnings. While everyone else is running around looking to squeeze dollars out of some untapped market sector, he is just kicking back and watching his profits roll in.

So what is he doing wrong, and how would being more capitalistic help humanity?

[dequeued]

> He's lucky that there's somewhat of a network
> effect in place for his business because any number
> of two-bit competitors could knock-up a more fully
> featured site over a weekend.

I have seen plenty of gaudy, flash-based, "web 2.0" classifieds sites trying to compete with craigslist, but they all fail miserably, as they should.

Craigslist's website was perfected years ago, and it shouldn't change.
It is ellegant and simple, and doesn't bombard you with flashy images and non-relevant information.

Many web businesses could learn a thing or two from Craigslist.

Craig Newmark has talent, and it seems that most of you only have greed.

[Dimitar Vesselinov]

Watch out for Facebook Marketplace!

[cutie_tech123]

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