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Tuesday, 14 April 2009

Singapore's online classified sector

I had a chat with the CEO of JobFactory a couple of months back. One comment that stuck in my head was that the local classified market for jobs alone is worth 100M easily. This number was computed based on current revenue models of major job sites like JobsDB and the revenue for SPH's recruitment classified.

The number assumes that the market wouldn't shrink. I don't believe that is realistic. Disruptive companies typically shrinks a current market. Craglist is taking billions out of the US classified market because most of the listings are free. Similarly, Wikipedia is taking billions out of the reference market and driving companies to cease operations.

I think that will happen to Singapore's classified market as well. So far, we have not seen this happening because very few have realise this: classified business are community businesses.

Classified businesses are marketplaces and we know now that markets are conversations. Where do conversations come from? Communities. People like to discuss, debate, review, recommend, encourage etc. They do that to learn about new stuff, to do business, to just share. They like to do that in communities, with people they know and have hang out with.

That is why I compare building classified businesses to building communities. You need to anchor communities first before becoming marketplace. We have already seen many examples of this. Let's take Hardwarezone, a local community of gadget lovers, and look at their forums. You can see that people are already buying and selling stuff. This is the future of classified businesses.

Unfortunately, all the local classified startups I have seen are taking a transactional approach to classified, i.e. making things more efficient. I believe displacement will come when someone realise it is not about transaction, it is about building community first. The latter has inherent advantages over the former. If you focus on transactions, you will realise that the key to success is a large and effective (& costly) salesforce. If you focus on communities, you will completely reverse the trend and operate a light-weight and flexible operation. Just see Craglist.

If I am building a classified business, these are 2 direction I would try:

i) Be a pure network play and link up with all current communities. Provide the platform whereby each community can become a marketplace to buy and sell stuff that fits their niches. Because you are sitting on top of the different markets, you are now in a better position to provide value add services such as recommendations, identify experts etc.

ii) Build a community up from scratch by becoming the most powerful value provider in the niche. For example, if I am in the real estate play, I would focus on providing the most relevant information such as pricing analysis, local news, best value home contractors, home maintenance tips etc. I would build up my mailing list to those who want to subscribe. Once I have at least 10,000 subscribers, I would then allow members to post their selling or buying intentions.

The classified market in Singapore has not seen the full extend of innovations that are happening across the globe. I look forward to see some young startups disrupting what is currently available.