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.

I was recently invited to be a speaker at the International Classified Media Association’s general meeting, which was entitled “100% Digital”. I was supposed to represent and explain web 2.0 to traditional print media classified companies. Henri and I took the trip to Amsterdam on Wednesday (i.e., Halloween), missing the puente but looking forward to the famous coffeeshops.

When preparing for the conference, I was expecting a bitter backlash from incensed traditional media types given that my message was: “Promote online or perish! Property search engines like nuroa are the future!”.

Ouch!

Harsh, right?

But the general response was: “Yeah, we know that, so how can we work together? Let’s sit down and consider the possibilities. We are all prepared for co-opetition”.

In general, everyone was very receptive to the message, and in fact, my message was one of the milder ones out there. Some members of the organization said it in far more blunt terms, making sure that members clinging to purely traditional models got a kick in the pants, in case they were still stuck in the 1990s.

And equally as impressive, a bulk of the presentations were “member-to-member”, meaning that current members of the organisation explained to their co-members how they’d updated their sites and what advantages they’d reaped as a result.

I spoke a bit with the CEO of a Dutch vertical search engine and learned abot how classified sites in Estonia, Finland, Russia and the US were working on integrating web 2.0 features. It’s amazing how people in such diverse places are generally doing the same sorts of things.

And there were workshops on usability, SEO, applying classifieds to the mobile world, etc.

In general, not a web 2.0 stone was left unturned.

And you definitely had the sense that the members had formed a close-knit family, facing an adverse situation, but determined to survive. This despite that fact that some of the participants were from “big” companies like Careerbuilder, Schibsted and Trader.

I thought it was a great conference, and I’m happy that they invited me (after reading a comment that I’d left on another post and then reading my blog). I made a lot of great contacts, some of which will likely result in collaborations and/or friendships, and as importantly, I learned a lot about the classifieds industry from people who’ve been working in it for the last 20+ years.

Congrats to Lucie and Shay.

Did you know that the English term “mortgage” originally meant “dead pledge” in French?

Real estate (or property, as the Brits say) almost meant “dead pool” for me. (”Dead pool” is the term that Michael Arrington of TechCrunch uses to characterise failed tech start-ups.) I ran my own real estate business for three years, so I fully appreciate the challenges that small real estate agencies face.

We started out as a franchisee of a well-known Catalan agency, but we soon found out that we were paying 2-3x more to advertise on a weekly basis than if we had called the newspaper and placed our own ads. The extra money was to subsidize the franchise’s expansion, but we never received anything of equal value in return.

We were too dumb at that point to realise that it was larceny.

We asked them why they didn’t improve their website to cut expenses, but they treated us like silly little kids and told that Spaniards don’t use the Internet to look for apartments. That we were being too American.

They were wrong: Most Spaniards initiate their real estate searches online. It’s not an American thing, it’s a common-sense thing.

And the franchisor’s website still sucks.

So we asked them to buy us out of our remaining franchise payments, and they agreed. And so we moved our staff to our independent office.

Things were going better for a while. We had more money to spend on marketing, and we used an approach that included 2 local newspapers and various online sites, including Loquo and Idealista.

We found that sites like Loquo and Idealista generated loads of new clients, but there were key differences in the types of calls that we received.

At first, Loquo was a phenomenon. We were getting at one point 100 calls a week, and maybe 20-30 of them were from Loquo. And best of all, it was free. But at some point, Loquo became too glutted with real estate ads without any effective search or filtering mechanism, and it stopped generating calls.

Other free sites claimed to have hundreds of thousands of monthly visitors, but they never once generated us any leads. They seem to rely on Google ads to make money without offering any real value to their users.

Idealista was also generally quite solid, but not so much as Loquo at first. And, it was a pay service, so that meant that we weren’t quite as enthusiastic about it.

We’d get a solid 15 calls per week from La Vanguardia, a local newspaper, but it was the most expensive single advertising outlet. My agents tended to favor the La Vanguardia clients, because Internet clients tended to be more demanding. They didn’t want any pitch. They don’t want to see 10 other apartments. Their bullshit-detector is on high alert. They just wanted to know if you had the advertised apartment, if it met their criteria and, if it didn’t, they didn’t want to leave their details.

Newspaper clients tend to be more willing to meet up. They are more trusting. They’re not going to do loads of searches on the Internet. They liked it if you did the work for them.

That was our experience, in any case.

And with this combination of marketing outlets, as they sang on the Jeffersons, we were moving on up.

But all of that came to an abrupt end in late 2005, when all of a sudden the market dried up. People were still looking for apartments, but banks weren’t giving out any money given all of the talk (IMF, the Economist, etc.) about a real estate bubble in Spain. They started to ask for double guarantees and to scrutinize mortgage applications more deeply.

But here’s the conundrum: The average Spaniard earns about €1500 a month from what I read in one of the free newspapers. (I say that as a disclaimer.). But the average price for an apartment in Barcelona was about €6000 per metre squared. Assuming that a small apartment in Barcelona is about 40 metres squared, that meant that the buyer would have to pay about €240.000. The Bank of Spain requires that the buyer should have about 20% of the purchase price as a down payment. So that’s €48.000 for a deposit, plus another €24.000 (10% of the purchase price) to cover expenses, meaning that a buyer of a mediocre, small apartment in Barcelona should have about €72.000 in cash to buy a flat — or the equivalent of about 4 years’ salary, assuming that no taxes are paid on the salary and that the buyer has no other expenses (maybe he’s been living at his parents’ home and has no car or social life?). And this means that the apartment should not be in any need of refurbishment and no designer furniture should be contemplated.

And of course, most buyers don’t dream of buying a 40 metres squared apartment. In Spain, they’d rather continue living at home with their folks. Or increasingly, they are moving outside of Barcelona.

For a while banks were offering creative solutions to fix this misalignment of realities, but the Bank of Spain soon got serious and become more vigilant in disallowing lax mortgages. The Spanish economy was at risk.

On top of all of this, a lot of real estate agents are badly trained, accustomed to being able to sell junk to eager buyers — most didn’t have the talent to actually convince someone that a mediocre apartment could be transformed into a dream home.

And, of course, you had all of the clever home owners and investors who refused to accept discounted prices / offers, sure as they were that the prices would continue to grow by an average of 17% per year.

A recipe for disaster, that I must admit, the Spanish government appears to have averted.

The US wasn’t so lucky, because they gave out “no-doc” subprime loans (i.e., you didn’t have to verify the borrower’s income, even though the borrower was a credit risk) and “ninja loans” (i.e., the borrower didn’t have to have income, a job or assets).

But the bottom-line is the same in both countries:

• The real estate market is struggling, meaning that it takes a very long time to sell a home;
• Many real estate agents have had to look for new professions, as commissions are harder to come by; and
• A lot of small agencies have closed, unable to weather the storm.

Real estate is a tough business.

And the key to the whole thing is marketing your portfolio of properties at the cheapest possible price to the widest possible audience. For a variety of reasons, the only options that used to be available in Spain were handmade Xeroed fliers that were placed on cars and expensive but generic ads in local newspapers. And then there are free sites like Loquo, which are cool as long as they don’t become so big and glutted that they lose all value. Or pay sites like Idealista and Fotocasa, which are great values relative to newspapers but not necessarily relative to sites like Loquo (at least from the agency’s point of view).

We are hoping to disrupt those approaches by giving talented real estate agents with a little bit of vision a new opportunity.

For most small agencies, even €300 a month on one portal or on one source that is generating mediocre lists of leads is too much. That’s why our service is free.

We understand that our property search engine will succeed only if we are able to generate real and meaningful leads for real estate agencies and sellers in general, so that we can all avoid the dead pool.

It’s that simple.

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.

Simon Waldman, Director of Digital Strategy for the Guardian Media Group in the UK, has posted a very insightful presentation about the intersection of the Internet and Web 2.0 on his blog. The text reflects a speech he gave to a German general media audience in Berlin. There is also a pdf version of the script of the presentation.

Simon makes the following arguments:

• Newspapers that want to survive need to embrace, exploit and excel in web 2.0. “There is no denying that our industry — particularly in Western Europe and North America — is structurally challenged, and that is almost entirely down to the net. . . . But I fundamentally believe that newspaper publishers who are prepared to experiment, innovate and invest online will create significant cultural and commercial value as a result of their efforts.”
• Internet moves quickly and probably a lot more quickly than the pace to which traditional media groups are accustomed. “Being online is like having a shop in a mall– you have to keep up with everyone around you, even if they’re not a direct competitor. Otherwise, you seem very tired, very quickly.”
• There are four axes of Web 2.0. “I know that there are all sorts of definitions of Web 2.0, but in my mind there are four key characteristics in the boom: Social networks, search and aggregation, collaboration and video.”
• Google is a frenemy. “Google and its impact on every sector of the economy’s attempt to grapple with the Internet are undeniable — and the newspaper industry perhaps more than most. Some of us see them as a competitor and a stealer of content; others see it as a source of traffic and revenue . . . . [B]ut all I will say is that defining and understanding a relationship with Google and other search players and aggregators is a crucial part of operating effectively in the online world.”
• There’s no turning back, even though most newspaper companies and traditional media groups might wish otherwise. “I wish Google would go back to being a nice, cuddly search engine that does no evil, rather than a global advertising bohemoth. Or at the very least, I wish they had to pay big bucks to carry our headlines and first paragraphs on Google News. I wish free classifieds sites would go away, or that the Internet has recruitment advertisers rushing to spend more rather than less. . . . [B]ut I also know that they are not going to happen. . . . The point is - this is about change. Not a gentle, start of the new school year, kind of change — but disruptive, shifting of tectonic plates kind of change.”

It’s good to see this kind of realistic optimism from the traditional media. There are obviously a lot of synergies between newspapers / media groups on the one hand, and search engines on the other. Indeed has The New York Times as an investor and strategic ally. Simply Hired has News Corp. Yahoo and Google are also increasingly trying to create cross-selling opportunities with newspaper groups.

But it’s also true that when we spoke to some investors initially - and even more recently - people seem to have the concern that search engines and aggregators “steal” their content, rather than they are partners that can redirect traffic to their businesses for less money than traditional media outlets, like newspapers, that charge a lot more for reaching target audiences.

In any case, it seems that the “slow death of newspapers” at the hands of search engines, aggregators and online classifieds sites is in the news a bit this week. Don Dodge has also an interesting post entitled “Online classified ads take $3.1 billion from newspapers,” which is review of an article in the Washington Post about the same topic. The post article is particularly interesting because it examines how vertical search engines such as Edgeio and Oodle are disrupting traditional classifieds businesses.

The bottom line: Search engines and aggregators are here to stay. Not all of us will survive, and most of us will be co-opted or bought. A few may become large, independent IPO-friendly companies. But the technological and economic disruption to traditional media companies can not be ignored or denied.

OK. So I’m trying a new experiment that goes against my nature.

I’m going to try to write shorter posts.

Carlos and Albert have told me that my posts are a bit long, particularly for non-native English speakers. I like to think of my posts as stream-of-consciousness mini-essays, but it seems that in this Twitter-generation, I might be a bit antiquated, lost in my fond memories of being an eager college student at Yale.

So for today, I’ll try the short post thing, which suits me just fine, because today is Monday and Monday is the toughest day of the week, particularly in August when everyone one else is at the beach and you’re in the office working.

So getting to the point: MarketingDirecto.com has a good summary of a study published by Edison Media Research discussing the changing perceptions about the importance of newspapers versus the Internet in the United States:

• 1/3 Americans (referring to people from the US) think that newspapers are the least important media format (relative to TV, Internet and radio).
• Only 10% of Americans think that newspapers are important.
• 33% of Americans think that the Internet is important vs. 36% that think that television is important.

In short, Internet is catching up to TV (traditionally, the most important medium), and newspapers are in danger of becoming irrelevant.

It’ll be interesting to see how the newspapers respond to this threat. In the late 1990s, it seemed that they mostly ignored it, fueling the rise of companies like Rightmove, Idealista and Seloger. This time around, I don’t think that they have that luxury, at least based on their annual reports and other corporate documents that show negative growth numbers without any optimistic future outlook.

It’ll also be interesting to see how television companies will respond. The BBC has demonstrated one approach with its iPlayer. But I’m sure this is just the tip of the iceberg.

Before I moved to London in 2000, I had this image in my mind that all Brits were genteel nobles who wore suits all day long, spoke perfect English and lived in 18th-century, Jane Austen-esque country estates with a staff of devoted butlers and other servants. In other words, I thought that the Brits would look and live like Mr. Darcy and Elizabeth Bennet.

But over the last few months, I’ve been appreciating just how aggressive the stereotypically stiff-upper-lip Brits are when it comes to adapting their traditional businesses to the Internet’s disruptive pull. The Brits are very thoroughly modern, and apparently more so than the country that created and initially popularised the Internet (though it should be noted that it was a Brit, Sir Tim Berners-Lee, that gets the credit for inventing the world wide web by creating the first HTMLs and web pages).

Why do I think that the Brits might get a jump on my paisanos?

First, I was skimming eMarketer yesterday, and I came across a few interesting facts:

• The online advertising market in the UK is the strongest in the world and expanding at a steady pace. In fact, Internet ads are expected to represent 18% of all UK advertising spending in 2007—more than double the percentage in the US, or in any other European country.
• Internet advertisements in the UK are among the most innovative in the world.
• The UK will accounts for more than 1/2 of all online ad spending in Western Europe, and that share will rise to 52.6% of regional online spending by 2010 (amounting to about €6.1 billion).

Second, there was the Wall Street Journal article that I wrote about yesterday noting that the Brits (via the BBC) have taken “what may be the boldest online broadcasting push by a large television network” by launching their iPlayer. As the Wall Street Journal notes in apparent awe, the US companies have been taking baby steps while the Brits are taking relatively giant leaps.

Finally, today, I’ve been reading Marc Andreessen’s blog (one of the best entreprenurial blogs out there) and he recounts an episode about an LA Times column by Patrick Goldstein that got killed this past weekend by his bosses. Goldstein had argued that the Times should promote itself by following the lead of The Mail on Sunday in Britain, which inserted Prince’s latest CD into 2.9 million copies, and also gives away music. Goldstein’s reasoning, as explained in a related New York Times article, was as follows:

“While the Times still is a profitable business, our revenue was down 10 percent in the second quarter while our cash flow was down, as our publisher put it the other day, a ‘whopping 27 percent, making it one of the worst quarters ever experienced.’ Times are so hard at the Times that the publisher has proposed putting ads on the front page to generate new revenue.”

It’s generally known that the newspaper industry in general is in a state of free-fall, and it’ll be interesting to see if and how the various media groups will reverse this decline. In fact, the New York Times reports that the LA Times has had many newsroom shake-ups, and its owner, the Tribune Company, is in the process of being sold. The British media groups are similarly in danger as readers move online and to other formats, but rather than trying to kill the story and pretend that nothing has changed, they’re taking aggressive steps to counter their declining businesses.

For the moment, the American media groups appear to be one step behind the Brits.

It’s also interesting to note how the Internet is disrupting traditional newspapers in other ways (apart from the lost revenue and lost circulation). Before the web 2.0 movement, a newspaper group could kill a story and pretend it never existed. But in this case, it appears that Mr. Goldstein simply leaked the “killed” story to the blogging community, and the article got resurrected after heavy-hitting bloggers like The Huffington Post, Slate, Gawker, and Marc Andreessen wrote about it, which helped get it written about in the New York Times.

As Steven den Beste, one of the Internet’s earliest bloggers, wrote on Instapundit.com. “[Some newspapers are] in the business of killing stories these days, not publishing them. But they no longer have the ability to close the gate because thousands of bloggers have dug tunnels under the fence.”

[By the way, for the non-Americans out there, the title "The British are coming" refers to the warning that American patriot Paul Revere allegedly made about the incoming British troops during his famous "Midnight Ride" during the Revolutionary War between the US and Britain for American independence. Paul Revere is almost as famous to us as George Washington or Abraham Lincoln.]