EBay's Challenge to Craigslist
Auctions still account for 69 percent of eBay's revenue, and its auction business grew 23 percent on sales of $1.25 billion last year. Only a few years ago, though, those numbers were closer to 40 percent. More than 81 million people use eBay, but the total number of listings on the site is flattening, and as competitors like Google have pushed out new features like Google Checkout, some analysts wonder if eBay's auction model may eventually be replaced in large part by search.
Acquisitions like StubHub have steadied eBay's ship, but in classifieds, that's not an option. Craigslist isn't for sale, and even though eBay owns a 25 percent stake in the company, it doesn't have control.
Soft launch
Thus, Kijiji—an attempt to push into an adjacent market with a potentially rosy future. Some analysts see it exactly this way, in fact. Benjamin Schachter, an analyst at UBS, wrote a research note last week expressing nothing but enthusiasm for the launch: "We have been anxiously awaiting eBay's move to more aggressively compete in the classifieds market in the United States, and while it is certainly very, very early, we are encouraged to see the company taking steps to compete," he wrote. "With its PayPal payment platform and feedback system, eBay is perfect for this type of local goods and service exchange."
To Schachter and others, Kijiji represents a low-cost way forward for eBay: Push Kijiji out without much fanfare or investment (the company may be setting records for soft-pedaling a launch; the eBay website doesn't even list the news on its announcements page), wait a little while, and see if it catches on.
EBay has gobs of cash, so its site should have more bells and whistles than craigslist, a notoriously barebones operation. And there is no shortage of ways eBay could make money from the site—by charging fees for listings, selling ads, or simply using Kijiji to generate more PayPal and Skype traffic.
Kijiji and commitment
All of which depends on getting people to use Kijiji, of course, and that's where some analysts are expressing reservations. "It's not obvious to me that this is a good place to make inroads," says John Morgan, a professor of business at the University of California-Berkeley's Haas School of Business.
Classifieds, Morgan says, are primarily about searching within a very specific locale for a very specific product. "It's really all about, 'I want a beige couch in such and such a place, and I don't want to move it,'" he says. This, he notes, is not exactly eBay's forte.
EBay is known for breaking down geographical barriers, allowing someone in Beijing to buy a bike from someone in Denver. Classified ads tend to do just the opposite, as people look to make sales in a specific city or neighborhood: Craiglist, for example, allows users to find exactly the kind of apartment they're looking for in a five-block radius. EBay may ultimately hone its abilities in more localized search, but right now, that is not what the company is good at. "If I was advising eBay," says Morgan, "I don't think I would do this."
EBay, for its part, isn't saying yet how committed it is to Kijiji. For the time being, the company, like most analysts, seems content to wait and see. "As usual," as Schachter wrote in his research note, "execution will be the key." In the meantime, anyone know a few million people with something to sell?
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