In the Collaborative Economy, Are Local Classifieds in Trouble?

I’m a big fan of my friend Jeremiah Owyang’s principle of “The Collaborative Economy.” The principle is thus (yet very hard to explain unless you actually experience it): the trend in social media, up to this point, has been the sharing of virtual content, goods, and services through close friends and family on social networks like Facebook, Google+, and Twitter. The Collaborative Economy is a new phase of this principle, where instead of only sharing online, close friends, family, and some times strangers are now using online tools to find ways to share in real life. The idea, when applied to commerce is that instead of businesses being the source of the transaction from them to their customers, they will instead become the facilitator of the transaction between customer and other customers. The future of social media will be services like Uber, AirBNB, and others that grasp this concept and enable real life social transactions to occur in physical form, from customer to customer and not from big business to customer.

This is why I fear for local classifieds markets. Having worked for 2 media companies so far (and at one being responsible for developing new online classified experiences), I know how important classifieds are to the revenue of local news media. Classifieds are at the core of revenue for most news media outlets, outside display advertising, and as sites like Craigslist have taken over these markets you are seeing some of that result on revenue for local news around the world. It affects these markets so much that you see when local classifieds sites like Salt Lake City’s KSL Classifieds overtake Craigslist, it develops a sort of monopoly on the market in terms of classifieds revenue that goes to these news orgs within the local market.

A key element to good Classifieds is getting local auto dealers to sign on. On top of that, real estate is another big factor for revenue in modern classifieds sites. To get an idea of where that revenue comes from, just go down any classified site like Craigslist or KSL Classifieds and look at which ads they charge you money for. You’ll see the biggest are auto and real estate. There are other similar categories though.

This is where the trouble begins. Right now we know (Deseret News, KSL Classifieds’ own sister site declared the end of cars!) that automobile sales are in decline in favor of services such as Uber (for getting around town with a driver) or ZipCar (for getting around on your own) or RelayRides (for longer-term car rentals) that embrace the Collaborative economy. On the real estate front, you’re seeing more and more people embrace the collaborative economy in favor of renting through services such as AirBNB. All of this is so much so that businesses like Ford are reconsidering their sales strategy to provide similar type rental services of their cars as they recognize the recent decline in sales.

In fact, my friend Jeremiah Owyang, who is advising many of these businesses already, is seeing such great demand in this market that he recently quit his job at Altimeter in favor of advising these businesses full time on their collaborative strategy. This should have all classifieds departments in news organizations, as well as Craigslist and the like paying attention – their revenue stream from autos, real estate, and similar transactions is in trouble!

My hope is that local classifieds, Craigslist, Ebay, and other similar sites begin to recognize this. Person-to-person transactions are in, and business-to-person transactions are on the way out. Services such as the person-to-person trade service Yerdle (founded by a former Walmart exec Andy Ruben, btw), really get this. They’re finding ways to build business models without the businesses at the top of the model, focusing on platform the B2B relationship. They’re developing new business models unfamiliar to traditional e-commerce sites, and ways to get in the middle of those C2C (Customer-to-Customer) transactions. Local classifieds will need to take this same approach in the future to survive as their business partners stop selling, and start taking this same approach (essentially making those partners competitors!).

I mentioned before that local news orgs are competitors with Facebook and other social networks and they don’t realize it yet. Local news has the potential for a very strong, tight-knit community of individuals passionate about their community and growing that community. They are in the business of sharing, and getting people to share. When it comes to classifieds, this applies there as well – the future of classifieds is, and should be the collaborative economy, and facilitating transactions from customer to customer, not from the business to the customer. As long as the revenue comes from the latter, classifieds websites are going to suffer in the future, and those that get this will be the winners.