Facebook takes on Craigslist and eBay with new classified ad service

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Facebook’s latest product launch appears to be a modest step into a classified advertising market currently fought over by eBay, Craigslist and more nascent startups such as LetGo and OfferUp – the latter recently valued at $1.2bn.

But with the official launch of Facebook Marketplace, through which users can list items for sale or search the area near them for things they want, the company could be attempting to use its gargantuan audience of 1.71 billion monthly users to upend the local sales market completely.

Facebook says that already, “more than 450 million people visit buy and sell groups each month”, using informal groups like this one set up for people in Hackney, London.

The world of peer-to-peer selling is notoriously hard to assess because transactions between individuals aren’t necessarily reported. But Facebook is definitely entering an established and already-crowded marketplace.

The largest operator in the classified ad space is still eBay. It sold more than $20bn of merchandise in 2015, according to its latest financial report, though much of those sales are from large-volume sellers, rather than individuals.

In the US, Facebook Marketplace will be taking on Craigslist, the classified ads site founded in 1995 and widely credited with destroying the market for newspaper classified advertising. Craigslist records 50bn worldwide page viewsand 80m classified ads per month – though because sales are between individuals and their results are unreported it is impossible to know how many of the ads are successful.

Yet Craigslist is old and ripe for disruption. It might be known for its old school site design, which has remained largely unchanged since it launched, but it has also missed the opportunity to adapt its site for mobile users – an opportunity several startups have attempted to grab.

New York-based Letgo launched in 2015, and OfferUp, which completed a $120m funding round in September, is backed by Silicon Valley investment firm Andreessen Horowitz. OfferUp’s co-founder and CEO Nick Huzar said in August that he expects the company to do upwards of $14bn in transactions in the next 12 months, according to GeekWire.

OfferUp is currently trialling an in-app payments system in Seattle – a feature Facebook’s offering does not yet have, though its peer-to-peer payments system in Messenger seems like an obvious candidate for future incorporation.

Nextdoor, the neighborhood social networking site which launched in the UK in September, is also a popular site for classified ads; and then there’s a network of Freecycle sites, the non-profit sharing group where people post classified ads to give away unwanted goods and furniture.

Facebook has huge advantages over its competitors because of its vast audience and significant resources but might still have its work cut out, according to Jan Dawson, chief analyst at Jackdaw Research.

“[Classified ads aren’t] necessarily what people think Facebook is for,” he said. “This is making Facebook about dealing with strangers, which is an awkward shift mentally.” On top of that, he said that unlike some of its competitors, Facebook is not yet providing any of the infrastructure around payments or delivery in order to hold on to custom.

“It’s not an end-to-end solution ... it’s not going to be markedly better than any other classifieds service today,” he said. Building scale will also be critical to their success, Dawson said. “Unless they’re going to hit that scale quickly, people will explore but they’re going to default back to what they were using before.”

In a statement, OfferUp CEO Huzar told the Guardian: “Facebook is an amazing company that does a lot of different kind of things. This is the only thing we do. We have a highly engaged user base because we have built an experience that people absolutely love. Our market traction reflects that. We are confident that OfferUp will continue to lead when it comes to buying and selling locally.”

Facebook did not respond to requests for comment.

Powered by Guardian.co.ukThis article was written by Nicky Woolf in San Francisco, for theguardian.com on Tuesday 4th October 2016 01.30 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010