These days, it seems like everyone is trying to start an online classifieds business. In the web 1.0 era when online real estate portals were themselves disruptive, their primary competition online was amongst themselves. The offline classifieds players thought that Internet was a fad, so they didn’t really feel the need to invest heavily online.

Now everyone is trying to start some sort of classifieds business online. Media groups have seen the light and are moving and promoting their newspapers (and classifieds sections) online. Directories are trying to monetize their listings now that few Internet-savvy people will search for a business using print Yellow Pages. In particular, a lot of directories are trying to get into local search, with classifieds as a key component of their offering. Social networks like Xing and LinkedIn realise that it might be easier to convince a business executive to pay €200 per month to recruit job candidates than it is to convince her to pay €10 per month for a premium membership, when you can pretty much get all that you need with a basic — that is, free — account. Even Facebook has added a marketplace section.

I started thinking about this recently when TechCrunch UK announced that News Corp. might be interested in buying LinkedIn. The story appears fairly credible, as it’s been picked up by venerable sources such as The New York Times, VentureBeat and The Wall Street Journal’s Kara Swisher). At first glance, the link between, let’s say, The Wall Street Journal, MySpace, SimplyHired (a US jobs search engine that News Corp has invested in), Globrix (a stealth UK property search engine in which News Corp. invested “millions of pounds” a few weeks ago) and LinkedIn might seem a bit farfetched.

What the hell is Rupert Murdoch thinking?! (That’s the same question people asked when he bought MySpace for $580 million. Now that Facebook has been valued at $15 billion, even though it’s the number 2 social network — MySpace is still number 1 — people are definitely not doubting the wisdom of Murdoch’s strategic investments.)

Well, one clue might be to look at what News Corp. did with SimplyHired and MySpace — SimplyHired powers MySpace’s job board. That’s one way to monetize MySpace’s traffic. Perhaps not coincidentally, SimplyHired also powers LinkedIn’s job board. And VentureBeat suggests that the rationale behind News Corp’s interest in LinkedIn is as a way to monetize the Wall Street Journal’s traffic once Murdoch removes the subscription model (Murdoch plans to make the Journal free, like the New York Times, which is now free and based on an advertising model — note that the New York Times is an investor in Indeed, SimplyHired’s primary competitor and another vertical search player).

In the VentureBeat author’s words: “News Corp.’s strategy, from what we understand: Somehow integrate LinkedIn’s network with the Wall Street Journal as well as its other newspapers around the world, hopefully figuring out how to recoup News Corp.’s newspapers’ declining classified ad revenue in the process.”

And Swisher’s description of LinkedIn is instructive: “[LinkedIn] is trying to be a business classified service with online presence and connection elements woven in.”

So this means that going forward, the online portals like ImmoScout and Idealista are going to face increasing competition from:

• powerful media groups like News Corp., The New York Times Company and Axel Springer, all of which need to move online to deal with declining offline classifieds revenues;
• the Yellow Page giants, which need to conquer local search or become irrelevant; and
• the social networks like Facebook, MySpace, LinkedIn and Xing, which find it difficult to monetise their traffic and are looking to classifieds as one possible solution.

In short, the classifieds space is becoming very fragmented.

In such a context, a property search engine like nuroa makes increasing sense. Why would a user want to search site by site, format by format, giant by giant, when she can encounter all of the relevant information in one place?

Maybe that’s why vanguardist media groups like News Corp and the New York Times are eagerly investing in vertical search engines, aware of their monetisation potential in the increasingly fragmented world of online classifieds.

For those of you who are generally interested in social networks like LinkedIn, I’ve included an interview with Dan Nye, the new CEO of LinkedIn. Intruders TV also has an interesting interview with Reid Hoffman (but they don’t allow you to embed the video).

Dan Nye (new CEO) of LinkedIn speaks with Kara Swisher of the Wall Street Journal

It seems that everyone is talking about the fact that online real estate sites are increasing in traffic despite the overall drop in demand. The story’s been getting a lot of press recently, and El Pais, a leading Spanish newspaper, is the latest to jump on the bandwagon, noting that in 2007, Spanish real estate sites doubled their traffic even as demand dropped dramatically.

The relevant data includes:

• 50% of all home seekers begin their searches online
• The total number of Internet users that search on online real estate sites to find apartments has more than doubled, from 1,6 million in 2006 to 3,5 million in 2007
• The increase in users can mainly be explained by the rapid growth of Internet usage in general
• Fernando Encinar, Idealista’s communication director, points to Germany’s ImmobilienScout as an example of the fact that a stagnant market combined with strong growth in Internet usage can still create a highly profitable online real estate business (I’m trying to compile more detailed info to analyze this last assertion in more detail, but the facts speak for themselves — Germany has had a relatively flat real estate market, but ImmobilienScout just got bought at a valuation of €545 million).
• Fernando also notes that properties in Madrid now stay on the market 10% longer (on average, apartments stayed on the market for 189 days this year vs. 172 days last year), while in Barcelona apartments stayed on the market for 35,5% more time (183 days this year vs. 135 days last year).
• 1/3 of the apartments listed on Idealista have decreased in price, and prices have fallen over the last 3 months by 0,5% in Barcelona and 0,9% in Madrid.
• After years of more aggressive increases in the price for listing on their sites, some real estate portals have waived price increases to retain existing clients with lesser budgets.
• The article suggests that the four main challenges for the existing real estate portals are:
  • Finding ways to improve their search filters
  • Offering more and better features
  • Playing a more active role in the sale and purchase process, apart from just providing listings and similarly general information. Alternatively, offering the real estate agents a better return on their investments will be essential in deciding which websites survive and which sites fail.
  • Getting to know the Internet user better, offering more personalized service and the option to participate in helping to generate content/count on the user’s feedback.

I couldn’t agree more. The ideas are clear. Now it’s time to see who executes best.

eMarketer has an interesting study today of the shift of local ad dollars away from traditional offline yellow pages to search engines in the United States. The argument goes as follows:

• Local offline yellow pages directories are a big market ($12.4 billion), particularly compared to national offline yellow page markets ($2.2 billion).
• Internet yells page directories (IYPs) don’t function as well, because people searching in a phone book go to the business categories as determined by the book’s index. People on the Internet go to search engines and do keyword searches.
• If only 20% of the ad dollars from offline classifieds and directories (a combined $37 billion market in the US) to online classifieds and search engines that would add up to $7 billion of additional local online ad spending in the US alone.

The following chart demonstrates both the current power and future potential of online classifieds and local search markets in the US.

Internet Yellow Pages sites, on the other hand, are expected by most analysts to grow a lot more slowly.

eMarketer notes that not every analyst supports the conclusion that local search will grow more quickly than Internet Yellow Pages.

But it appears to be clear that, regardless of to which destination they might go, people are moving online to find out more information about local businesses, whether in the form of Internet yellow pages, local search, local directories or newspapers online.

It’d be interesting to see the relevant numbers for Europe.