Before the Internet boom, print publications made a tidy profit from classifieds, particularly in jobs, real estate and cars – the “rivers of gold”. Whereas in a print world three players could compete and make money in each vertical in Australia, in an online world in a market the size of Australia, it is very tough gig being number 2 and even tougher being number 3.
Melbourne has seen three of the best online classifieds businesses in the world startup here to own these three online classified verticals in Seek, REA and carsales.com. Each of them is a story in their own right but it is a really interesting case study to look at why these three businesses are at/near the top of the tree from a global perspective.
Is it just coincidence that the three of them are the “best of the best” and just happen to be Australian? I think this has some merit but I also think that the dynamics of the Australian online market have a bit to do with it as well.
In Australia we have seen News Limited, Fairfax and Trading Post try to make up the lost ground in the online world in each vertical with mixed success. Each of them had geographical markets where they were stronger than others which was enough to ensure each could make good money.
This worked in a print world but not in online where the geographical boundaries can be (are) redundant, especially in a country the size of Australia. Brands like Careerone, Mycareer, Trading Post, Homesonline, News Motoring, Carsguide and Drive have seen new investors, joint ventures, brand changes, business model changes, etc in an effort to stay relevant as a number 2 or 3 in each vertical.
While the three print publishers were trying to move into online while still protecting their print profits in each of their geographical strong-holds, Seek, REA and carsales.com had nothing to protect; they just had to build great online businesses to win their market and this is exactly what each has done. There has been no legacy to consider or cloud decision making.
The US in comparison to Australia has seen a different story. From an automotive perspective, Autotrader.com has successfully migrated from print to online to be number 1 in auto online classifieds in the US with Classified Ventures, a joint venture between 5 major newspaper publishers, not far behind as the number 2 having also successfully migrated from print to online with cars.com.
Meanwhile in the UK and Canada, mature markets like the US and Australia, Autotrader.co.uk and Autotrader.ca have also successfully migrated from print to online to be the number 1 players. As a side note, the Autotrader businesses in the US, UK and Canada are separate businesses and not associated.
I know at carsales we know there will always a strong number 2 and welcome competition. We are a naturally paranoid company and not one to sit still. We know we must keep on innovating and improving our value and offering to our clients. We also know that Seek and REA work in the same way.
All three online giants are making inroads in taking their IP and technology to international markets and proving successful as strategic investors. This does not take away from what each is doing in Australia and in fact only enhances it as we tap into a even more diverse talent pool to keep us ahead of the pack here in Australia.
It is hard work being a number 2 player from an online perspective. There often just isn’t enough of the dollar to go around. This is a great incentive to stay ahead in Australia and why one of the things carsales looks for in its international strategy is market leaders or businesses that we think can be a market leader with our strategic input.