Are classified sites in Africa profitable?

You’ve probably heard of these very popular online classified sites, Craigslist and Gumtree. Both sites offer buyers and sellers an opportunity to engage in a free and open market.

With the success of these sites in their respective countries and beyond, African entrepreneurs are keying into the online classifieds market. Today, there are probably more than 20 classified sites in Nigeria alone that offer the same service, but with different business models and technical functionality.

Some of the popular niche classifieds sites include Nairalist.com, Txtoweb.com, Chukslist.com, Gbogbo.com, Bunchbay.com, Kerawa.com Nigeria, and WhoGoBuy.com. In addition, other Nigerian websites also offer online classified ads alongside their other core products and services.

In Africa, some local African classified sites include Vottle.com, Junkmail.co.za and NetAds24.com. Just like other classified sites, they all have one thing in common — they offer buyers and sellers an opportunity to engage in a free and open market.

The Upside

In terms of revenue, the online classifieds market has seen tremendous success. In 2007, reports estimated Craigslist’s revenue at $150-million, with its sole source of revenue coming from paid job ads in selected cities.

According to Wikipedia, the world’s largest online encyclopedia:

• Craigslist serves over twenty billion page views per month, putting it in 37th place overall among web sites worldwide and 11th place overall among web sites in the United States (per Alexa.com on January 8, 2010), with over 49.4 million unique monthly visitors in the United States alone (per Compete.com on January 8, 2010). With over eighty million new classified advertisements each month, Craigslist is the leading classifieds service in any medium. The site receives over one million new job listings each month, making it one of the top job boards in the world. The classified advertisements range from traditional buy/sell ads and community announcements to personal ads and adult services (previously erotic services).

The Downside

Craigslist has witnessed a great deal of criticism. Most notably from an August 2007 appeal by Atlanta’s mayor, Shirley Franklin, that the site take steps to avoid unwittingly enabling child prostitution through its classified ads.

There have also been allegations by several US states that the “Erotic Services” ads on Craigslist were being used for prostitution. On 13 May 2009, Craigslist announced that it would close the ‘Erotic Services’ section, replacing it with an ‘Adult Services’ section where the postings will be reviewed by Craigslist employees — postings to the new category cost $10 and can be renewed for $5.

The Nigerian Story

In Nigeria, classified sites have their own story to tell. Some, like classifiedsnigeria.com, have packed up shop because of a lack of the right business/marketing strategy and/or sustainable business models.

Others have had issues with using the right programming languages and the right functionality, such as spam-resistance and security features needed to sustain such sites. For example, WhoGoBuy.com (launched in late 2005) built their site using ASP initially, then migrated to ASP.net about a year later, and then moved over to PHP a few months after.

In March 2010, Nairalist.com’s founder Seun Osewa asked some very interesting questions. Should Nairalist have been packaged as a software product and not a new website? And, how many Craigslist(s) can Nigeria, or the world, accommodate?

The topic generated many reactions, which provided suggestions on how Nairalist.com could be improved. One of the best suggestions was that Nairalist.com should be turned into a Facebook application, allowing people to share items they want to sell with their friends, and their friends’ friends.

Some Success Stories and Advice

According to Fritz Ekwoge, founder of Kerawa.com: “The Nigerian classifieds business is a business of trust. And trust takes years. For what it’s worth, I don’t think we at Kerawa.com are doing any poorer (financially) than other web ventures in the same space (say social networks, forums) at the same age (say less than two years). There’s a lot of (potential) ways to monetise it beyond contextual or banner ads.

I love those geeks (software developers) trying to create online classifieds for their local communities. They’re creating a very useful service. Monetisation, like what you hear in other online classifieds markets will come. It will come when the Internet itself becomes common in Africa. And when it does, the pioneers will generally have the greater share.”

He also stated that when Craig Newmark started Craigslist in 1995, it took him about five years to open in another city. However, being the first to market, he is now benefiting from the fruits of his labour. Ekwoge believes that the Nigerian classifieds market is growing and will boom financially as it has done in other developed countries.

Case Study 1: Kerawa.com

So is an online classified site a financially viable business in Africa? Ekwoge shares Kerawa.com’s revenue model and his success story with Kerawa.com in Cameroon:

“In all our supported countries, we get revenue from Google Adsense, which seems to do us well. We believe the reason it is so is because we serve mostly commercial content (jobs, stuff for sale, properties etc). This helps in that our Google Adsense inventory tends to be more relevant and lucrative since Google advertisers spend more on those categories. I guess news and other non-commercial content websites don’t have that luxury, and thus have a poorer adsense performance.

In Cameroon, we have VIP ads. This is a major source of revenue for us. We cannot replicate this model in Nigeria yet though, because we are still building the audience to be on a par with that in Cameroon.”

Case Study 2: Txtoweb.com

I think there is something to learn from Txtoweb.com, a service that lets you send classified ads via SMS from your mobile phone straight to the web. With this strategy, Txtoweb.com has made classified ad listings in Nigeria a lot easier and smarter, though not necessarily safer yet.

With a N50 (R2.52) per message charge on each SMS posted on the website from your mobile phone, I think Txtoweb.com’s revenue model is a game-changer in Nigeria’s online classified ads market.

Developed in 2009 by Fusure Limited, a technologically-driven group with a visionary bias for developing ground-breaking web applications, Txtoweb.com is the most innovative (and perhaps financially viable) classified ads platform in Nigeria.

Some Final Thoughts

These two examples show that online classified sites are financially viable in Africa. As Ekwoge noted though, it requires time and trust before it sees traction and stable income.

Interestingly, there are other “potential” ways to monetise online classified sites beyond Google Adsense, contextual or banner ads. I’ll be writing about some other cool ways to monetise from online classified sites in a future post.

But before then, just be wary of Google’s marketplace application called Trader, recently launched (beta) in Uganda and now spreading across Africa.