Is eBay’s ‘real’ threat Amazon or classifieds (or both?)

May 22, 2009

ChannelAdvisor ChannelAdvisor By ChannelAdvisor
I did this interview with Business Week about classifieds today and it got me thinking….

On this blog I’ve spent a good bit of time comparing eBay vs. Amazon’s seller business.  I definitely think when it comes to ‘practicals’ Amazon is taking significant share from eBay and others in ecommerce.

But if you think back to the recessionary period of 2000/2001, eBay was counter cyclical. People used eBay to clean out their garages, attics and turning their old stuff into cash.
Newspapers were losing classified revenue to eBay hand over fist as eBay gave people a much easier way to turn their items into cash.  You can call a newspaper, create an ad for some wacky $/word formula, put in your phone number and deal with all that, or upload some picture(s) to eBay, set your terms, run an auction and hope for bid-up (which frequently came in those days).  eBay even had a local feature where you could look for items around you.  I remember getting my first flat-screen LCD monitor and selling my 21″ tube-based monitor for $50 on eBay to a local person that stopped by and got it.  I don’t think you could do that on eBay today – the local aspects have been dumped over the years.
In the current 08/09 recession, eBay hasn’t been countercyclical – Why?  I’ve been somewhat ‘blaming’ Amazon, but some new data out today sheds a big spot-light on classifieds that have been under the radar for a while, but shouldn’t be any longer.
Classified Usage Doubled in last 4 Years
The Pew Internet Project has a report out today that you can find here, that shows that classified sites (mainly craigslist), have doubled in usage between 2005-2009.  According to the Pew research, half of the online audience has visited a classified site.  On any given day about 10% of the online audience visits a classified site.
This graph shows the dramatic growth in classified usage in the last four years:
Pew_classifieds1
Over that timeframe, checkout what happened to the newspaper classified business.
Pew_classifieds2
Newspaper classifieds peaked in the late 90’s and then they got hit with eBay.  Ultimately they recovered – mostly by focusing on the non ‘for-sale’ classifieds that eBay was chewing away at such as jobs, vehicles, real estate and personals.  You can see in the chart that they started to recover by around 2005.  Then **WHAM** look at that drop by half from $19b to $9.9b.
What’s the impact on eBay?
eBay doesn’t break out transactions by seller-type – individual, small business, large-business, etc. so there’s no way to know how many of the what I call FSBO (For Sale By Owner) types of sellers and their corresponding GMV have left eBay.
Thinking through some back of the napkin math, if there are 40m unique visitors to craigslist, let’s assume half of them are there to buy products and the other half are there for non-product oriented categories.
20m buyers/month at a 10% conversion rate and a $100 ASP yields $2.4b/yr.  The ASP on craigslist could be considerably higher if there is a larger % of car sales.
I’d say that a big chunk of that – 80% or so is straight out of eBay’s GMV pie or approx $2b/yr.  At their $60b/yr GMV run-rate that would be about a 3.5-7% headwind depending on the ASP.  If amazon is in the $4b range, you can attribute eBay’s 10% y/y decline path in a pretty clear way.

eBay is in a tough spot – Amazon is eating away at selection from the top-end – large and SMB retailers.  Craigslist is pulling selection from individuals and the Local element.  Buyers follow selection.  It will be interesting to see how eBay navigates this strategic dilemm over the next year or so and if they can carve out a spot in the middle or do they need to more aggressively take on Amazon, craigslist, or both?

SeekingAlpha disclosure – I am long Amazon and Google.  eBay is a strategic investor in ChannelAdvisor.