Classified Advertising: A Web Success

by Jakob Nielsen on September 1, 1997

Sidebar to Jakob Nielsen's column on advertising on the Web.

Classified advertising is a natural for Web delivery since it is basically a database application. Thus, even though I mainly think that advertising doesn't work on the Web, I am very optimistic for the prospects of Web-based classifieds.

Classified ads have several properties that make them well-suited for the Web:

  • they are a classic "pull" medium: customers seek out the classifieds when they decide to look for a used car or when they want to hire a house-keeper; most people don't leaf through the pages just for fun
  • they are well-suited for computerized searching and sorting: you may want to look only for used BMW cars that cost less than $5,000 or are less than 3 years old, or you may only be interested in a red Z3
  • they are time-sensitive, but not on a day-to-next-day basis: you want to see all open offers, no matter whether they were posted today or yesterday, or even earlier. As soon as the advertised offering has been sold, the ad should be pulled and not shown to any more customers (a static listing wastes both parties' time)
  • sellers can type their own entries directly into the ad database since they know what they are selling. Using the hypertext feature of the Web, ads can link to as much background information as necessary; cryptic but space-saving abbreviations go away (harddisks are cheaper than newsprint)
  • multimedia features can save both buyers and sellers time by allowing potential buyers to learn more about the offering before contacting the seller (just how cute is the puppy? — well, see the photo, or even the video)

Note how all of the properties that make classified ads suitable for the Web also make them unsuited for printed newspapers. The fact that classified ads are bundled with news in a single physical product has nothing to do with the inherent qualities of either product. In fact, there are no synergies between classifieds and daily news. There are benefits from associating hobby-related classifieds with hobby-oriented news coverage, but such coverage is usually better done by magazines (or specialized Web sites) than by newspapers.

Classifieds and daily news are bound in the same wad of newsprint due to artifacts of the paper-based production and distribution technology: newspapers have big printing plants so that they can print large pages with many ads cheaply; they also have delivery people who pass by every house every morning (a "push" technology that is only necessary as long as there was no way of allowing people to retrieve only those categories they were interested in). Change the media technology, and there is no reason newspapers should dominate the classified ads business.

In fact, I predict that many newspaper companies will go bankrupt in ten years or less unless newspapers get so hard-core about the Internet that they dominate Web classifieds by mid-1998 in the U.S. and mid-1999 in the rest of the world. Any later, and this business will irrevocably be owned by other companies. Newspapers still have a small window in which they can join together and establish a single, dominating classifieds site by seeding it with copies of all the ads they run in their legacy editions. If this is not done very soon, though, alternative sites will be too well-established to overthrow.

The nature of classified advertising tends to support increasing returns: most potential buyers will go to the largest site first because it will have the most relevant things advertised for them to buy. Sellers will want to advertise on this site because they will get the most buyers.

Many of the things that are advertised in the classifieds are geographically bound: real estate is the extreme case, but even cars or collectibles are usually bought from a seller who is located relatively close by the buyer. Of course, some rare collectibles may be bought from people around the world, and people certainly often want to look at real estate in other towns, whether for relocation or vacation purposes. It is thus not clear whether it will be possible to maintain multiple local classified sites or whether the Web will have a single, large site, with geographic location as one of its search criteria. It is also not clear whether there will be advantages from having multiple, specialized, sites (e.g., one for selling stamps and another for selling coins) or whether it will be better to share infrastructure and brand recognition across classification categories and have a single, multi-purpose site.

Even though there are some unknowns, I am very confident that classified ads have a great future on the Web. It is the one kind of advertising that seems made for the Web. (The other being search ads.)

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