Facebook launched a Marketplace which enables users to buy and sell items from each other. The launch is Facebook’s second time around the online marketplace. At this point in time, Facebook is not facilitating payments or logistics. Ever since this launch, many of us have been pondering if it will eat up the existing big classifieds players in India.
However, to be honest in the Indian context, there is no comparison between Facebook and other players.
OLX is not a dominant brand anywhere across the globe with the exception of a few developing countries. Facebook marketplace was launched in four countries- USA, Australia, New Zealand and UK, where other players like OLX, Quikr does not fare on the competition map of Facebook. It is also interesting to note that Quikr is moving towards becoming a vertical conglomerate from being a C2C horizontal marketplace (Read my earlier article here).
For starters, it sure has the potential to disrupt the current set of horizontal C2C classifieds players. Here are the challenges that Facebook has to counter to become successful in India and eliminate all competition:
1. Network effect and culture: Many people mistakenly believe that the value of a platform increases with the addition of users. However, that is not the case. It’s with the increase in the usage is what really creates the network effect.
So while Facebook has 140-150 million monthly active users in India, everyone will become a signed-in user by default when it opens up its marketplace. But, this will not automatically translate into high usage.
2. Hyperlocal or neighbourhood discovery: Many cities in India, like Delhi or Mumbai, are bigger than some European countries. These cities have various localities and each locality is further divided into various sub-localities.
Facebook needs to show the availability of items in the neighbourhoods (not just locality or sub-locality), which is in a 5-7km periphery.
For example, if you live in Saket (Delhi) and you are looking to buy a used phone, you would want to look at results from all neighbouring localities (not just Saket).
Similarly, a seller should be able to choose a neighbourhood (or a collection of nearby localities) and not just one single locality to increase his reach and the chances of selling.
Facebook needs to design this intuitively to be able to lend a great user experience.
3. Hyperlocal volumes: This is a chink in armour for current set of horizontal classifieds players in India. For example, searching for Home and Garden (Complete category) in one of Delhi’s largest locality– Janakpuri- throws only 14 results (try using a leading payer’s app). Searching for dining tables in the same locality shows only a handful of results. Facebook will need to build not just city volumes, but more importantly neighbourhood/locality volume to inspire people to view, discover and buy, else it will not be able to create any interest. Although leading classifieds platforms have millions of listings, there’s just not enough volume when it comes to locality level and sub-category level.
4. Serendipity: Horizontal marketplaces will thrive on very high usage and very high frequency of visits.Users should be coming back very frequently to discover new and unique items in their neighbourhood, which they were not actively searching for. .The current set of players score low in terms of product innovation around ‘discovery that leads to delight’ or uncovering hidden gems from neighbourhoods.
This is very important for Facebook as it will attract more users (which will eventually increase conversion chances) and also sellers (who will benefit from better sales).
5. Content quality: This is a hygiene requirement. Non-compliance can lead to breaking of the network effect.. Remember browsing through the leading classifieds portals four to five years ago? You would find ads of love gurus or work-from-home-and-earn-
Facebook needs to have a country-specific content policy and monitoring (automated, crowdsourced and owned staff) system to be able to succeed in India. It also needs to remove listings of products that are sold. We will have to wait and watch how that will be done.
6. B2C versus C2C content andcategories: This will also be a big pain area for Facebook. Most of the so-called C2C Classifieds players in India still have about 25 percent to 30 percent listings from businesses(This was 40-50 percentaboutone to two years back).
More importantly C2C categories like furniture, books, pets, bicycles, etc., individually contribute between three and fivepercent to overall listings. These C2C items are not only of great interest to users, but are also precursors of liquidity. Such listings:
a. Can be easily and frequently bought or sold.
b. Are not high-involvement products so the decision to buy can be quickly taken,
c. Do not require extensive negotiations.
This, lack of focus by existing players, can be capitalised by Facebook marketplace.
To cite an example: If a lot of property dealers were to fill the post feeds with sale items, it will not be a great experience for consumers who are looking for items by individual sellers. How will Facebook filter out business listings from C2C listings and how much importance it would give in curating C2C categories, will have a lot of say in its success.
7. Content Richness: Facebook will have to focus on making each content piece valuable by allowing users to create a rich social graph.Content richness creates trust and also eases decision making. Can Facebook crowd-source richness? How can it incentivise sellers to create richer listings? These are questions and challenges that Facebook needs to address.
8. Value for stakeholders: By achieving the above, Facebook can ensure value for sellers, buyers and other stakeholders (crowd, that helps in curation, marking, certifying and adding richness to content). This is a weak link for current crop of players and an opportunity for Facebook.
9. Avoiding content conflict and bad user experience: How will users view specific categories or items in a specific location? Will the marketplace listings have any conflict with general newsfeed and side-panel ads? Will this crowd one’s notification panel? Will the regular ads and conversations compete with marketplace feeds?
This can make or mar user experience, especially since Facebook’s organic reach is already decreasing.
10. Monetisation: Monetisation can be via premium listings, boost posts, paid recommendations or transaction percentage (in future). Whatever the mode, Facebook will need to monetise fast (because it already has the audience advantage) to be able to preempt and destroy competition.
Having said that,Facebook needs to manage growth and content quality together. It should also focus on usage rather than just users.It should not aim to grow too fast and lose focus on quality.