For many startups, the classifieds model is dead

Advertisements and classifieds used to be a gold mine for startups. Generations of companies scaled this way: think Google and Facebook in the US as well as JobsCentral, PropertyGuru, and SgCarMart in Southeast Asia.

But as these platforms continue to dominate by leveraging network effects, some startups are finding that it’s foolhardy to directly compete with them for advertisers. Instead, these newer players are turning to other modes of income that are more promising, such as subscriptions, transaction charges, or management fees.

While it’s true that global advertising spend is rising – up almost 18% from the year before – a little over half of that was spent on Google and Facebook’s platforms – 31% and 20%, respectively.

When it comes to reach, few channels can compete with Facebook and Google, which are both almost entirely driven by advertising.

The rise of Facebook Marketplace

Facebook is putting its dominance to good use by offering its take on the classifieds platform. Marketplace, the social network’s general listings platform, started almost three years ago, letting individuals buy and sell items. As of May 2018, 800 million people in 70 countries worldwide were using Marketplace monthly across several categories, including electronics, home, fashion/apparel, entertainment, property, and cars.

While its uptake in Asia is unclear, it appears to be putting a fair bit of resources into the region after launching here in early 2018. Marketplace is now accessible in most parts of Asia – Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam.

Then late last year, Facebook kicked it up a notch by introducing enhanced search functions for home rentals and automobiles – Marketplace’s two most highly searched categories globally, according to the company – in several markets. Within Asia Pacific, the enhanced car search and discovery update launched in Indonesia and Australia, while an improved home rental platform was launched in India and Thailand.

These new features include an expanded inventory as well as custom filters like dog- and cat-friendliness for homes and types of transmissions for cars. Marketplace is also giving users greater selection by partnering with local auto dealers and home rental portals to list their inventories.

Thailand is a strategic market for Facebook within Asia Pacific – it was the first country in the region to gain access to the platform. “People in Thailand were turning to Facebook to find their next home, and [we] wanted to make the experience even better,” Facebook’s APAC director of commerce partnerships Christine Chia tells Tech in Asia. The platform is seeing over 55 million monthly users there, she adds.

However, even as Google and Facebook expand their ad dominance, the status quo is being challenged.

Mobile ads like those on Stories – photo or video messages that disappear within 24 hours – are the future, Facebook CEO Mark Zuckerberg laid out in a note earlier this year. Privacy-focused features like Stories currently have lower levels of monetization than its News Feed system, but that could soon change.

Impact on regional classifieds players

Diversification

It’s not all bad