by Adam Juda on Saturday, May 2, 2015
I've seen quite a few entrepreneurs reaching out to the internet for help. Although their needs were varied, many of them begged for suggestions on how to launch a classified ads website. Such websites can be highly lucrative as they can be easily monetized and require very little in the way of ongoing content creation. Unfortunately, such sites tend to operate as natural monopolies. It's great for established players, but a difficult nut to crack for new entrants.
Below are three suggestions to increase the likelihood of success for your new classifieds website:
- Collapse the two-sided problem into a one-sided problem. Rather than trying to attract both buyers and sellers, the site should initially act as one of them. I would generally suggest that the site's owners act as the seller, as that would prevent the need to house an ever-growing inventory. Cash-strapped entrepreneurs could utilize dropshipping with established providers in order to minimize their costs. It shouldn't be too difficult to convince a few vendors to go along with you. In a sense, you'll be offering to market their products for free and pass along 100% of the revenue to them.
- Limit the scope of the site. Craigslist is the biggest classified ads site. It would be absolutely crazy to attack them head on. Large generalists are frequently unable (and unwilling) to compete with highly specialized businesses. For instance, a classifieds site built specifically for the sale of bicycles would be able to compete quite well against other sites. Not only could it promise its users very high degrees of relevance, but it could tailor its search functionality. If I needed a bicycle, would I prefer to go to a generalist site (like Craigslist), or a site specifically for bicycles? What if the latter allowed me to specify my height, weight, preferred speed and mileage and filtered out all but the most appropriate matches? Craigslist can't do that, but a specialty site could. As the site became more popular, it would not be difficult to add related products. A classified ads site for bicycles might extend into bicycle parts, then bicycle clothing and then perhaps into equipment for other endurance sports.
- Limit the scope geographically (if it makes sense). There are some items (those that are low value and low weight) that can be safely sent through the mail, but many items are either too bulky or too expensive to sell via the post office. If sales must be face to face, limiting the geographical scope of the site to a small area will ensure that no user of the site has to wade through large numbers of irrelevant postings before finding an offering that is applicable to him.
Creating a classified ads site can be a challenging endeavor, but it isn't impossible. An understanding of business theory and economics can simplify the effort greatly. Thinking of setting up an online business and need some help? You'll certainly want to contact me for a consultation. Oh, and don't forget to pick up my excellent book on how to price software systems.