On the Internet, A Tangled Web Of Classified Ads

Andrew Davis prepares his 2001 Mitsubishi Montero for sale after placing ads on multiple Web sites, which he found
Andrew Davis prepares his 2001 Mitsubishi Montero for sale after placing ads on multiple Web sites, which he found "a confusing jumble" both for seller and buyer. (By Bill O'leary / Post)
By Sam Diaz
Washington Post Staff Writer
Friday, August 31, 2007

A few years ago, a classified ad for Andrew Davis's 2001 Mitsubishi Montero SUV might have been limited to two lines of descriptive shorthand: A/C, pwr pkg, 6cyl AT, 2wd, $9k firm.

Today, in ads on the Internet, Davis is posting pictures of his car in an off-road setting and sharing such details as the replacement of the timing belt and water pump 5,000 miles ago. He has even included a link to a feature article about his car's model in Popular Mechanics.

Davis, a Clemson University graduate who moved to the Washington area only a few weeks ago, posted free classified ads on Craigslist and the Marketplace area on Facebook, the social-networking site. He also paid for an ad in The Washington Post, a bundled deal that also put his listing on Cars.com and other Web sites.

His approach of putting his vehicle in front of as many potential buyers as possible illustrates how dynamic the process of classified advertising has become. For sellers, the options have moved beyond newspaper ads and fliers on coffee-shop bulletin boards. And for buyers looking for a car, an apartment, a job or a new puppy, it means better chances of seeing relevant ads on a variety of sites.

This push into online classifieds -- a business dominated by newspapers for more than a century -- is still very much in flux, said Greg Sterling, principal analyst with Sterling Market Intelligence in Oakland, Calif. While classified revenue has been shrinking at newspapers across the country, a growing number of Web companies, both established and new, are moving into the business, although not necessarily dominating the market.

Newspapers have lost their grip on classifieds in recent years. Once a steady source of revenue, classified advertising at some of the larger chains has dropped 14 to 20 percent over the past year, notably in once-lucrative segments such as automotive, real estate and employment ads, according to Fitch Ratings. Fitch, a credit ratings agency in New York, said this week that newspaper performance has been weaker than it originally forecast for the year.

Online traffic to classified sites, meanwhile, has grown 23 percent, to more than 46 million unique visitors in July, up from about 37 million a year earlier, according to the market research firm ComScore in Reston. Traffic has declined on some sites, among them Yahoo Classifieds, where it fell by 13 percent. But it has grown on some newer sites such as MySpace, where classified listings have jumped 33 percent since their August 2006 debut.

The classified market has become increasingly fragmented as a growing number of companies search for the best way to convert offline newspaper ads into a Web format.

"It becomes a confusing jumble of sites," Sterling said. "If you're a seller, that's a problem, and if you're a buyer, that's a problem."

What is emerging are two primary online approaches. One is simply to shift the traditional classifieds model to the Web, aggregating ads to a single site. The other involves distributing those aggregated ads to as many Web sites as possible.

EBay has backed some of the biggest and best-known classified sites. It partially owns Craigslist, the popular no-frills site that collects local listings, and allows buyers and sellers to post listings free. EBay recently introduced its U.S. users to two similar sites, Kijiji and Gumtree, both of which started overseas.

Geebo, based in McLean, is another online listing site trying to compete against Craigslist by creating a brand name that will draw buyers and sellers to its site.

"When I think about classified sites, outside of Geebo, I can only think of one, and that's Craigslist," said Geebo chief executive Greg Collier. "It's not like I can think of 10 or 12 of these right off the top of my head. There may be a lot out there, but nobody knows they're there."

In contrast, such companies as Edgeio and Oodle are less concerned with creating a site that buyers will view as a destination. Instead, they are pushing their way into the marketplace by acting as a go-between, cutting deals with newspapers, as well as Web sites, to increase the number of places where their listings appear.

Edgeio collects classified listings through individual sellers, as well as listings on sites like Geebo, or from traditional publications. Using software, it then distributes those ads to Web sites with specialized audiences.

For example, a niche Web site for fans of cocker spaniels might partner with Edgeio to display ads from a local breeder selling puppies. The ads might come from an individual or an ad posted in the community newspaper, but are then distributed to the cocker spaniel site through Edgeio.

"Our goal is to get more traffic to the [Web site] publishers," said Edgeio co-founder Keith Teare. "As money flows through the system, we take our share."

Like Edgeio, Oodle acts as a middleman, but is positioning itself to be more like a buyer's agent, offering such tools as e-mail alerts. Oodle's service searches classifieds and finds products a prospective buyer is looking for. In addition, it analyzes its listings for trends and other market data for buyers to use in their research. For example, someone shopping for a 2002 Honda Accord will also get information about that car, such as the average price for that year and model, in Oodle's listings.

Oodle chief executive Craig Donato said his model is a new approach to classified advertising. The challenge now is to get those ads in front of a local audience in a creative way so that buyer and seller can find each other and complete the sale.

"What's happening essentially is that companies are trying to do things online that lead to offline transactions," he said. "The transaction always occurs between two humans offline. . . . You would never rent an apartment without seeing it first or take a job without interviewing. That defines classified ads."

For that reason, local papers say they will be key players, even as classifieds find more venues online.

Forging partnerships with sites like Oodle have allowed newspapers to test some different approaches without having to build their own technologies, said Mort Goldstrom, vice president of advertising for the Newspaper Association of America in Arlington.

But Fitch Ratings analyst Mike Simonton said newspapers have a long way to go in making up for eroding classified revenue.

"We don't think that online classifieds have replaced or are successfully replacing the print classifieds," he said. "There's just a lot more competition in that market."

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