The Future of Free Online Horizontal Classifieds - Winner Takes All

6:48 AM Suvir Sujan 8 Comments

Nexus was an early backer of one of the two leading free online horizontal classifieds in India and was instrumental in building out its leadership in the country. Both the leading companies are helmed by smart mature leaders and the battle between the two companies has been on for a few years now. I can see this battle continue in the short term given that both companies seem to have cash in the bank for now. However, eventually, in this business model, only one player can become a strong viable business, not two. Winner Takes All!

The value proposition of a free horizontal classifieds platform is simple - Maximum Liquidity.  Buyers want more sellers and sellers want more buyers.  This is a true network effects business (i.e. the value of the platform increases with more users using it).  Once there are a critical mass of sellers and buyers on the platform, it is very hard replicate the liquidity on the platform. More users will beget more users and the liquidity will continue to grow without scaling marketing significantly.  And when there is unparalleled liquidity, that is when monetisation avenues like fees for preferred placement of ads works as there is no other alternative to market to such a large audience online. And that's when you can build a potentially highly profitable business as the costs are mainly technology and maybe some reduced marketing as a result of the network effects.

In India, the challenge with the online free horizontal classifieds industry was that it was a two horse race from the beginning. Both companies raised adequate monies, built strong platforms, and invested heavily in marketing. Users came to both platforms. Since it was free, users experimented with both platforms. Both platforms built a decent seller base and buyer base. Both platforms are trying to build "unparalleled liquidity". However the existence of two strong free platforms doesn't allow either one to become a successful business. Once a platform significantly dominates in liquidity, it is able to reduce marketing costs and switch on monetisation aggressively. In order to differentiate to be able to monetize, one of these companies has launched vertical platforms (i.e. separate platform for auto, real estate, etc.). These are good growth initiatives, however they may not help them to win the horizontal classifieds war unless they are unparalleled leaders in liquidity. A vertical classifieds business competes on "best service" for a finite liquidity (you cannot compete in best service for a very large base of liquidity - it is too complex) versus a horizontal free classifieds that competes on "unparalleled liquidity" but potentially giving up on service.  There are strong independent players that compete in vertical marketplaces with focus and capital dedicated towards solving the "best service" problem. It is hard for a horizontal free classifieds who is fighting the  "unparalleled liquidity" battle to also fight the vertical battle of "best service". The danger of trying to do both is that resources may get spread too thin and both battles could be lost.  

I suspect some of the vertical strategies in India are driven by similar strategies in China. However, in China, the leader in free horizontal classifieds business acquired  a vertical classifieds only once clear leadership in liquidity was established. So monies were invested in building vertical services on top of horizontal leadership without fighting both battles simultaneously.

Hence I believe the future for free online classifieds in India will lie in one of the following outcomes :
a) Both horizontal platforms consolidate and create one platform 
b) One horizontal platform outlives the other with a stronger balance sheet
c) One horizontal platform stops competing in the free classifieds space and pivots to vertical or other adjacent businesses.

Wish both companies luck and hope they will be able to navigate through the competitive environment successfully. Interesting times ahead.  

8 comments:

Quikr starting to accept payments + delivery now "quikr doorstep" looks a way to move from content to commerce (we had discussed this once)

Nice and impressive details of this post. Thanks a lot for the sharing.

professional seo company in Dindigul | coimbatore web solutions

Amira Abe said...

Excellent post with useful information.

Free classifieds in India

Amira Abe said...

Great resources! Thanks for sharing!
Free classifieds

Nice Post.... If your looking for any exchange goods Go and visit
Barterkiya.com

Mia Gomez said...

Now a days forex trading is going to be good and huge journey. You can know about forex tradingFX and here are also options for the Trading, Assets, liquidity, execution, currency exchange and retirement.

Tejaswini B said...

Hi,
Thanks for sharing this information.
if you have post free,advertising and classifieds go and visit
post free ads,classifieds

Days4Listing.com is India's best platform for posting classifieds In India .