Majestic Research

Investor's Business Daily

Online Auction King eBay Also Big in Classifieds

By Doug Tsuruoka
Published: April 04, 2008

Question: What’s the biggest classified ad outfit in the online world? Craigslist? Google?

Answer: eBay.

EBay is sweeping past rivals in offering online classified services to users worldwide, a little-publicized fact about the online auction king.

“Within six months of entering the market for online classifieds (three years ago), we blew past all of them,” said Jacob Aqraou, the general manager of the classifieds unit.

Aqraou says eBay began slowly building through acquisitions.

Today, classifieds are eBay’s fastest-growing business unit. In the fourth quarter, classifieds revenue surged 104% from the year-earlier quarter, the company says.

Aqraou says the company is eager to launch or acquire more classified sites in different nations.

Marktplaats, Gumtree

San Jose, Calif.-based eBay runs four major classifieds units: Kijiji, Marktplaats, Gumtree and Loquo, in the U.S., Europe, Asia and Australia. It bought Marktplaats in 2004 and Gumtree and Loquo in 2005. EBay launched Kijiji in 2005 and introduced a U.S. version last June.

Market trackers Nielsen and comScore say these four eBay units had 31.3 million visitors worldwide in February. That’s higher than the 25.2 million visitors posted by Craigslist in February. It’s far higher than the 177,000 posted by Microsoft’s (MSFT) Windows Live Expo classifieds service and the 161,000 visitors posted by Google Base,Google’s (GOOG) classifieds unit. Yahoo’s (YHOO) global classifieds traffic was so low it’s not included in the ranking, though it does better in the U.S. Related Story

Craigslist CEO Jim Buckmaster says he’s not worried about any rankings.

“We don’t see ourselves as being in competition with other companies,” he said. “We see ourselves being more in public service.”

EBay says its global dominance of online classifieds is even higher than these numbers suggest.

Citing internal company figures and other Nielsen data, eBay estimates that the classifieds Web sites that it owns worldwide boast 65 million unique visitors and 2.7 billion page views a month. It says the sites run 14.2 million ads per month.

“The secret of eBay’s success is they were early to the game in identifying classifieds as a potentially large opportunity,” Standard & Poor’s equity analyst Scott Kessler said. “They seized on this opportunity via acquisitions and launching new services.”

Others agree.

“Classifieds is a market ripe for consolidation, and eBay seems to be the only player out there who’s consolidating,” Majestic Research analyst John Aiken said.

EBay’s classifieds holdings are diverse and far-flung.

Kijiji, whose name means “village” in Swahili, is a classifieds service that serves Europe, Asia and the U.S. It offers classifieds for items such as cars, pets and jobs. It draws about 17 million visitors a month worldwide.

Gumtree is the No. 1 classifieds site in Britain, Australia and South Africa, while Marktplaats attracts 56% of Dutch Web surfers. Loquo is the No. 3 classifieds player in Spain.

In addition, eBay owns smaller sites such as mobile.de, an online classifieds site in Germany that sells cars. It bought the site in 2004.

But probably eBay’s best-known move in the classifieds field was its 25% purchase of Craigslist in 2004. It isn’t clear if eBay intends to boost its stake in Craigslist, or whether Craigslist would welcome such an effort.

Revenue Sources Differ

Various eBay classifieds units make money in different ways.

Kijiji and Marktplaats get revenue from banner ads, pay-per-click ads and premium feature fees for prominently displayed classified ads and other services.

Gumtree gets its revenue from pay-per-click ads and from fees for premium features. It also charges listing fees for specific ad categories in Britain.

Loquo gets revenue from pay-per-click ads and premium feature fees, while mobile.de gets revenue from services fees.

The classified Web sites that eBay runs in Europe, Asia and elsewhere mostly are localized and country specific. Services are tailored to a specific nation. Kijiji’s French Web site, for example, just carries ads in French, and is staffed by French workers.

EBay has found there is little cross-border trade for its sites. An exception is mobile.de, a German-language auto classifieds site that lures users from Russia and other European nations. Aqraou says mobile.de attracts non-German users because German often is the second or third language of many Europeans.

EBay’s interest in acquiring more classified properties is part of a new strategy it unveiled following February’s announcement that Chief Executive Meg Whitman would retire. John Donahoe, president of eBay Marketplaces, replaced Whitman on March 31.

EBay hasn’t made a classifieds acquisition in Europe since 2005. Aqraou says the time may be ripe for eBay to add to its stable.

“We’re looking for acquisitions,” Aqraou said. “If we find a company in the right place at the right time, we’ll buy it. Price isn’t as important as being in a country where there’s a real opportunity to make money.”

Aqraou, based in Copenhagen, Denmark, says one likely locale for acquisitions is Scandinavia. He mentions Denmark, Sweden and Norway as other options. He says that though Scandinavia has a relatively small population, it offers an unusually profitable market for classifieds.

Another target area might be Eastern Europe, especially nations like Poland that have large e-commerce markets, Aqraou says.

EBay says demographic trends in Europe favor more acquisitions. Aqraou says one of the biggest trends is the number of nontech people going online to use classifieds. They include older adults 60 to 80 years of age who have become comfortable using computers and checking classifieds online.