Q   Winner takes all?

Motors, jobs, houses. Do you see on each of these segments a "winner takes all" dynamic (besides some players specializing in certain niches)? How important is the local component in each of the segments?

A   You would think, if one big successful website provides a great service then who needs other sites that offer the same services? But there's a catch. The winner does not always take it all. For example: in the Netherlands, marktplaats.nl (since 2004 owned by ebay) is a runaway success and the biggest player in online classifieds. In 2004, after several years watching their classifieds decline in print to almost nothing, the newspaper group de Telegraaf finally launched a competitor to go head to head with Marktplaats.nl, called Speurders.nl. But now, 2 years later, they still didn't catch up,  despite spending millions of Euro in marketing and leveraging their media assets in print, tv and magazines. We don’t believe the Telegraaf will catch up Marktplaats in the foreseeable future but clearly it occupies a good second place. A silver medal is still a medal. Speurders will also start charging for ads in some high value categories, which will allow a positive cashflow contribution (eventually). So although Marktplaats remains the clear winner and dominates the market, Speurders proved that it isn't impossible for second-place players to survive. 

Q   Is local important?

How important is the local component in each of the segments, motors, jobs, houses?

A   Classifieds are absolutely a local market. Nobody wants to travel 200 km for a second hand fridge, so a fridge in your neighbourhood is by definition more interesting. However, a national or even global website which offers a sensible interface for finding local content can work just as well as a local website. If you can enter your postcode and a distance you are willing to travel, for example, that’s just as good as a website dedicated only to your neighbourhood. And if the website remembers your postcode for next time (with a cookie, perhaps)... well, even better.

Where do we work, where do we shop, where do we go to the cinema? It’s all local. For most of us, if we plot our daily movements on a map, we spend 99% of our time within a few km of our home and our workplace. DId you know that most people who move house actually buy within 20 miles of their current house? Same goes for new jobs. This also emphasizes the importance of local. 

Q   Are newspapers too late?

Are newspapers already too late to get a foot on the online market of some of these markets? In some areas, newspapers have a respectable share but in others, despite significant investments, their share is ridiculous. 

A   Of course not! It's (almost) never too late. Newspapers have so much that works in their favour and they are most certainly not too late -- provided they allow their online business managers to compete on a level playing field with the online players.

Example: Monster.com will publish your vacancies worldwide in a few minutes; the same goes for online-only players in real estate, autos, etc. But now newspapers start worrying about deadlines for the next printed paper... we can't publish online before we publish in print or we will de-value our printed papers...

We say, this is wrong thinking! OK, so there's an asynchronous publication of newspaper and online. Sure, it's slower to print and distribute thousands of papers than to update a web page from a database. Of course it is! We all know this. Your advertisers know it too.

Another example: newspaper advertising is built on a database just like the online players. But newspapers usually operate on systems designed before the web even existed. They were made for print. They are not well suited to the needs of the web. The newspaper brings tradition, brand values, marketing power… but it also imposes its old systems and workflows. These old systems have to be replaced now with faster, web-based systems that are capable of handling both online and print. This is one of the messages that Rosetta tries to bring to newspapers as often as we can: you cannot hope to win a competitive race if your systems are outdated and your workflows are labor-intensive. 

Q   Vertical sales teams?

How important is it to have a vertical sales force for each vertical segment (motor, jobs, housing)?

A   In our work at Rosetta we have seen several approaches over the years. Combined online and print, separate online and print… it seems there isn't one right way to organize your sales teams, you have to think about your business and its key issues.

 

-   All sales personnel need ongoing training. It's the key to motivation. Before they can sell online services they need training in the different benefits and attributes of advertising in print and online. Also note that training is an ongoing task, not just a day or two in the beginning! Keep your staff informed about all developments that affect their selling activities. Give them competitive analysis reports that allow them to explain the benefits of your services to advertisers, compared with the competition.

-    Reward sales with extra incentives for the services and products that offer the highest benefit to your business – whether these are online or offline or both, publishers should make it clear through incentives which product offerings to sell in each circumstance.

-    Self service advertising is a fast-growing trend. It's cheaper, quicker and margins are often higher. But not all customers are the same. Some prefer self service, others prefer the human touch, speaking to a real person.

-    From a practical point of view, it's hard for anyone to keep up with all the developments in all the vertical markets. And most sales people probably have more affinity and knowledge about one market than if they are trying to cover all of them. Overall, we would recommend to assign sales personnel to vertical markets. But use incentives, manager feedback, role playing and lots of competitive analysis to make sure they have all the knowledge about that market at their fingertips when selling services to customers.

 

Q   Are margins going down?

Is the online classified markets going to end up being a pretty low price, low margin market? Can free listings and paid classified companies live together or is this going to be a free listings world? 

A   No, they're going up! The online classifieds market is above all a market where volume is critical. Lots of ads and lots of traffic. Once these critical factors are in place, the benefits of automation and self service on high usage and volumes actually make margins stronger than in print. Long term, we can see that classifieds in print are in decline and that trend does not show any sign of changing in the foreseeable future. There are some exceptions of course (high-value jobs, cars and homes, for example) but even these markets too are increasingly online. Remember that a well-run online business is more about fixed costs than variable costs. Get your infrastructure right and you see that increased volume only brings a relatively small increase in cost. It is not unusual to see bottom line margins of 60 or 70 per cent in the online business – compare that with print!

The combination of print and web for classifieds remains popular because print classifieds still offer a significant value added. People still buy newspapers and they still read the classifieds inside. Classifieds in print are in decline but they are not dead yet. We would not expect them to disappear completely for a long time. But for newspaper publishers looking to identify the best way to react to this decline, it is a question of managing the transition from print to online and being in place with appropriate services for customers in all media.

Finally, don’t forget also that mobile phones are small computers. At Rosetta we already made several interfaces to our classified systems for imode, SMS, Palm, WAP. Our customers expect us to understand all media where we can serve classifieds in a way that gives sellers and buyers a value.

Q   What about new players (Google, MSN, Yahoo)?

How do you value the threat posed by powerful new entrants in this market? Ebay? Google? Microsoft Live Expo? Yahoo?

A   All those companies are great technology companies and they are moving (or already moved) into classifieds. Google Adwords, of course, is classified advertising built on keywords instead of classifications. Yahoo has offered classified advertising for 10 years. Look at Ebay acquisitions over the last 2 years and it is clear how they value classifieds.

These companies have great market presence and far greater reach globally than any newspaper. So newspapers must leverage their strengths, build on what they have (local brand, local marketing, local networks) and recognize that only a significant investment in best of breed technology and aggressive marketing can place them at the top of the value chain with strong competitors like these. 

Q    How about aggregators?

Can classifieds aggregators like Oodle and Edgeio pose a threat in the future? Can they bring down prices? Is there a legal vacuum?

 

A   Deep linking is great! A classified ad needs to reach people who are looking for whatever it is that's in the ad. The aggregators are nice guys, they're helping achieve that result. They're just doing a vertical version of what every search engine does with other web pages. And they are business people; we can probably talk it over and make this work for all of us. So perhaps sometimes there is a need to remind ourselves that the web is a network, after all, no point in fighting it, go with the flow and capitalize on the possibilities it offers.

The legal situation here, like so many new developments on the web, is of course being gradually defined in reaction to events – that’s a normal state of affairs for the law makers, by the way.

See also: "a vision for the future"