Online Classifieds-Is It A Winner Takes All Market?
I discussed this question with a few people in the industry (internet) and frankly I was dissapointed because
many of them without any concrete logic expressed their agreement with Online classifieds being a winner takes all market.
It’s easy to describe a market as ‘Winner Takes All’. It’s easy because it gives one an easy way out of many questions.
When the market is ‘winner takes all’- then you only have one option and that is to grow largest in the quickest possible time-leveraging network effect to the fullest.
However, somewhere I am not convinced with this and thought of discussing this aloud on atomthought with you all:
So here are the thoughts, and then let’s discuss and decide if this is indeed a winner takes all market!
Firstly there are various examples in India and abroad that signify that multiple players can operate with significant market shares in classifieds market:
1. If you observe the ‘Vertical Classifieds’ market in India you can see that very clearly there are 2-3 big players in each vertical:
Jobs: Naukri, Monster and Times
Naukri despite being in the market since 15 years and despite being a very dominant player, is still under pressure by the other 2 players.
Matrimony: shadi.com and bharatmatrimony.com Both players very strong.
Real Estate: 99 acres, Makaan and Magicbricks.
Observe the Print classifieds market- there is no single winner. Despite ToI being the largest English newspaper, and Dainik Bhaskar perhaps being the largest newspaper
None of them is a clear winner.
Net. net, in all the above examples the winner doesn’t takes all.
2. Even in Europe we have leboncoin, ebay.fr and a couple more horizontal classifieds portals competing and sustaining successfully.
3. In the US of A you have ebay classifieds and craigslist.
4. In order to become a winner takes all player- there needs to be a very strong network effect- for example look at facebook- more the users join > larger the value for each user> thereby attracting even more users> even more value for users …and so on.
The effort required in creating and maintaining our network on a 2nd social platform is so high that we restrict ourselves to 1 social platform.
Now that’s then a winner takes all market. Read Social Networks & Their Strategy for India here
However we don’t see such a strong network effect in classifieds space.
The sellers, in a classifieds space, can post their listings in 2-3 portals (because it’s free, and it takes a minute to post); the buyers on the other hand like to explore hence they don’t mind surfing 2 -3 portals, and more importantly buyers search on Google initially and then go to 2-3 classifieds portals for further search and purchase.
The question can be asked that if a classifieds portal amasses huge volumes of listings quickly can it not easily kill other players, by demonstrating strong network effect?
The answer is ‘no’. More listings per day means that a particular listing will get less time on first page, thereby attracting less number of views and responses thereby dissatisfying users.
Hence more volumes will not build network effect-infact after a threshold it can break whatever little network effect was created.
So In classifieds space- there is a network effect; however it breaks up before becoming strong enough, thereby allowing more than 1 player to operate with a significant market share.
Infact people will use more than one classifieds portal, also because some portals will be very efficient in certain categories or geographies-hence it looks like that Online Classifieds space is not a winner takes all market. We will continue to see 2-3 major players across the world and in India in this space.
But these are my thoughts, what’s your take?
Leave a Reply