Are startups moving away from advertising income?

Dear readers,

Last week, we interviewed Carousell’s CEO, who expects the company to double its revenue this year. The startup wants to be a classifieds leader in the region and achieve fat margins in doing so.

But the classifieds landscape remains competitive. Carousell may have strong market share in the general category, but that sector seems to be filled with casual sellers who may be less likely to buy ads compared to sellers in higher-value segments like cars or properties. These categories, however, are already dominated by strong incumbents.

We’re also seeing recently how various up-and-coming marketplaces are moving away from the traditional model of paid boosted listings.

Carro, for example, is attracting investors by becoming an “Alibaba for cars” and offering a variety of services, including finance, on which it can monetize.

In Indonesia, property marketplace 99.co is moving beyond classifieds and into a transaction-based fee model.

There are clear limits to how far advertising income can take a business that’s challenging an incumbent. Marketing dollars gravitate towards the leading platforms – that’s where all the eyeballs are. It’s why Facebook, Google, and Amazon are dominating advertising. Network effects has kept them on top.

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Cheers,

Terence
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