Online classifieds: Classifieds sellers focus on the web
The web has shaken up classifieds, but publishers are learning to adapt. Adam Woods reports.
Small ads are big business on the internet. As people flock to check out the latest jobs, used cars, plumbers and flatshares, print revenues are coming under pressure, as recognised by Guardian Media Group.
It relaunched its online recruitment pages online last April to follow this user migration.
"I definitely think the classified market's future is online. At the moment, consumers view the internet as their main source of information," says Amy Lennox, head of online at media agency Manning Gottlieb OMD.
Traditional publishers, which have long relied on classified revenues, are seizing the opportunities. In December 2004, Associated Newspapers forked out £14m for the UK's largest property site, Findaproperty.com, having already paid £36m for Jobsite.com in March 2004. Meanwhile, others are focused on building their own new brands. Trinity Mirror, Northcliffe, Guardian Media Group and Newsquest are partners in Fish4, set up to offer an online home for their classified ads and now thriving under various brands, including fish4jobs and fish4cars.
But, it's not only the offline players that have the muscle to drive consolidation. In May, eBay bought London jobs and flats web site Gumtree.com, while its international classifieds site, Kijiji, has been picking up shares in its rivals.
Rupert Murdoch has admitted that newspaper groups have struggled to adapt online, but some traditional publishers have expanded successfully. Directory and magazine brands like Yellow Pages, Thomson, BT, Auto Trader and Exchange & Mart have all carved out sophisticated products online.
According to Jonathan Williams, head of marketing at Trader Media Group, while online advertisers still give a lower yield than those in magazines, volumes are growing fast. TMG publishes 13 regional Auto Traders and a raft of other magazines, each with a web presence, and 85 per cent of its listings are exclusively online. Both off- and online have their own sales teams, but the separation isn't total given that 35,000 private print ads are booked each week on the site.
"The magazines offer different branding and exposure to dealers," says Williams. "It's a fine balance, but we are selling 320,000 copies every week. We have seen a small decline, in line with classified magazines as a whole, but it hasn't been significant, and we are now seeing some of those people coming online."
The richest classified market on the web is automotive. In April, the most visited classified site was Autotrader.co.uk, with 0.24 per cent of all traffic and 33.1 per cent market share, followed by ebaymotors.co.uk with 0.23 per cent and 31.9 per cent respectively, according to Hitwise.
"Cars are a commodity that sit very well with the functionality of the internet," says Nolan Mills, senior marketing manager at UBM's Exchange & Mart, which Hitwise says gets 1.5 per cent of the UK's automotive classified browsers. "Motoring is the core element of our business, accounting for more than 90 per cent of our traffic, and online is increasingly critical to our advertisers for response. In many instances, they prefer online's key benefits of control and convenience."
The same characteristics drive online directories. Thomson and Yellow Pages share roughly 90 per cent of the £850m advertising market offline, but directories are having to fight harder on the web where search engines like Google and Yahoo! are the first port of call for most users. "Directories viewed search engines as competitors not so long ago," says Warren Cowan, chief executive officer of search engine marketing specialist Greenlight, which works with Thomson. "But, now they are realising there are many more information and research points online that a consumer can use to find information."
It's just four years since Yell.com went up against the search engines with the slogan 'Don't search, just Yell.com', but in April it announced a deal with Google to offer business listings and content for its UK local search offering. Yell.com president Dr Eddie Cheng says: "The deal with Google is very simply this: historically, we've always submitted our advertisers to search engines, but it was a bit hit-and-miss and there were all kinds of reasons why submissions could be more or less successful. Essentially, this formalises our position with them. At the moment, 90 per cent of our usage comes directly to our site."
Cheng says Yell.com is one of the few dotcoms to have turned a consistent profit and has been in the black since 2001. Its annual results, published in mid-May, reveal turnover growth of 40.3 per cent and 141,000 searchable advertisers. "In the last three years or so, we have finally hit a home run; the product has been taking off, with great usage and great penetration of the advertiser base," says Cheng. He thinks the key to supporting both offline and online businesses lies in their differences. "We have always positioned Yell.com not as Yellow Pages online but as something more. The book is very driven by classification and boundary base, and those are two areas we're trying to move away from online."
The fact that directories such as Yellow Pages and Thomson have always been classification-driven has limited their appeal to customers in sectors such as retail as they've had to guess which category will fit their enquiry.
Online, keyword search has changed all that. "If you want to buy an iPod, you can look under anything from 'Record Stores' to 'Computer Stores', but people just want to put in the word 'iPod'," says Cheng.
Thomson Local has doubled traffic to its site through an aggressive search-engine optimisation strategy to improve its visibility on major search engines like Google, Yahoo! and MSN. "We have been quite realistic about the things happening in the marketplace," says Brian Harrison, general manager for Thomson Directories' Internet Development Group. "What we really do is connect buyers and sellers. If we know people are going to the internet to look for products or services, we need to have an appropriate vehicle that allows the sellers to communicate with the buyers. When people go online, some will go to an online directory like ThomsonLocal.com, but others will go straight to search engines."
Thomson Local provides information on about two million businesses in the UK. Its classified sales are driven by packages such as Business Finder, a priority listing product for companies without a web site, and WebFinder, a pay-per-click search-engine marketing service. While Thomson has discrete sales teams for online and offline, Harrison says the sell is as integrated as possible. "We have a multi-product portfolio strategy and all our sales reps are trained in that," he says. "When we sit down with a business, it is important to be able to explain that people are looking for them in different places."
Clearly, any new brands have their work cut out if they are to compete with their multi-channel rivals. Online directory service 192.com has taken a novel approach. It uses data from Dun & Bradstreet, Thomson and BT to fill any information gaps.
"We are different to the Yells and Thomsons of this world, which are very geared towards classified searching," says managing director Keith Marsden. "We're trying to be a one-stop shop for anyone who wants information on people or a business. No one directory is complete, no matter what anyone tells you."
192.com aims to score further points by offering data from Companies House and others. This premium service will come with a new revenue model; while basic name, address and telephone number searches are free, mining down further into the data will require users to buy search credits, starting at £24.99 for 100. Classified ads are the next stage of the plan. "When we decided to go into the advertising model, our initial thought was that the majority of businesses in offline directories understand a single model that says they pay a fixed amount and appear in a particular publication," says Marsden. "Typically, they don't understand the pay-per-click model. So, in the initial phase of our advertising product, people will pay a fixed fee for a one-year period."
Given that the key market for classifieds, both on- and offline, is SMEs, can the classified sites afford to shake up the traditional payment model?
For most of the online market, a bidding system controls the prominence of a client's ad in the search listings for a particular keyword. The fixed nature of directory ads is often cited as their major failing, which is why businesses jostle for position at all times, depending on how much they bid and how intelligently they play the system.
Not everyone favours that model, however. Yell.com charges a flat rate on the basis that "most of our customers don't feel like sitting in front of a computer for an hour in the evening, managing their keyword programme," says Cheng. "We see ourselves as the outsourced marketing partner of our customers, so we always have a preference for a fixed rate card. The decision we took was to rotate our advertisers to give each one a chance of coming up, and this is a key differentiation."
Meanwhile, a new system from search marketing firm Miva (formerly Espotting) attempts to monetise a classified ad at the very point when a customer phones the advertiser. According to pay-per-call, which has launched in the US and is coming to the UK later this year, advertisers in the Miva listings only have to pay when a customer rings through to the number on the ad. Whereas pay-per-click demands the client has a site, pay-per-call only requires a listing. "The traditional advertiser listed in Yellow Pages is paying a certain amount of money to make sure he is in the book, but there is no guarantee that he will get any calls," says Miva's chief marketing officer, Seb Bishop. "Traditional advertising pushes a message to the consumer, but what we have created here is a 'pull' medium."
Although the internet tends to deliver a younger market, consumers may lack some of the trust that the offline brands have managed to build up.
"I think people sometimes get cynical about the results they find online," suggests Richard Davies, planning and client services director at online media agency Equi=Media.
And while many small SMEs have taken to online classifieds, the larger brands still appear to be weighing it up. "If you look at the larger advertisers in a big, paper directory and try to find them in a search engine, you won't necessarily see them," he points out.
Evidently, there's a bright future for paid-classified advertising online, along increasingly sophisticated lines, and it is likely to be driven by at least some of the big, offline brands. For paper to survive, it needs to evolve.
TOP WEB SITES FOR CLASSIFIED ADVERTISING
Since its launch nine years ago, featuring nothing but the classified listings of the paper product, Autotrader.co.uk has established itself as one of the 16 most-visited web sites in the UK. In April 2005, the site attracted 4.2 million unique users, generating 45.4m vehicle searches and 218.8m page impressions.
Founded as a multi-sector online recruitment service in 1995 by three brothers - Keith, Graham and Eric Potts - when the UK internet had only 40,000 users. It was relaunched as part of the GoJobsite European network in 2001, but reverted to its original name in 2003. It claims 2.25 per cent of all traffic to the largest classified sites.
Founded nine years ago, Yell.com has been in profit since 2001-02 and now generates more than 20m searches a month. According to May's annual results, its turnover growth of 40.3 per cent reflected a 36.9 per cent rise in searchable advertisers to 141,000, including the 23,000 who do not advertise in its printed products.
Under the umbrella of the Dept for Work and Pensions, jobcentreplus.gov.uk provides guidance for people looking for a job and claiming benefits. Employers can advertise their vacancies for free. More than five million job details are viewed each week through the web site, making it one of the top 100 most-visited in the UK.
While little needs to be said about the success of online marketplace giant eBay, the company's stand-alone automotive web site has built up a steady following in its own right. The web site currently receives more than two million visitors each month, and it claims that a vehicle is sold every two minutes.
This article was first published on marketingmagazine.co.uk
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