Why Is Nigeria In A Classifieds Site Bubble?

There is a classifieds site bubble brewing in Nigeria and Africa and something need to be done about it. But you will need to know the root cause to believe it.

In the early 2000, I remembered how Craiglist became a sensation in Nigeria. Apart from the fact that most Nigerians could not buy anything from the site while in Nigeria, first time and excited Internet users back then were just fascinated by the whole idea.

While Yahoo Messenger and Hi5 where taking much of the Internet traffic, Craiglist was very popular amongst many Nigerians who were interested in doing buying and selling online. The eureka feeling was just what amazed most Internet users at least, many were using the Internet via epileptically-connected cyber cafes.

But this is 2016 and many Nigerians have advanced past the time of antiquities. The growth of Nigeria’s Internet space has been preached far and wide. Many investors through proxy investors have invested in the market. eCommerce took the biggest bite of the pie, but market realities and sky high burn rates of their venture capital is making investors to be holding back.

Another sector that is receiving huge investments both from local and international sources is – Internet classifieds.

These sites are springing up like every other day. They are cacophonous and amorphous. While very few are focused many are aimless promising buyers and sellers that they can sell anything online for free. The craze started in 2008/9 when many classified sites were advertising all over Lagos. Many of these sites soon closed down after some millions of Naira were spent. OLX came in 2012. The company backed by Naspers, same owners of Konga have spent so much money pushing the site to  the top 10 most visited site in Nigeria. Africa Internet Group, AIG, owners of Jumia has invested in series of classified sites to take on the market as well.

The business seems very pretty simple and fast to set up. just like daily deals sites like Groupon and Dealdey, there are developers who sell templates for classified sites. Startups do not really need to write a single code. Just purchase a domain and secured  hosting and you are good to go. The free for all idea makes it compelling buyers and sellers to fall in once the advertising spend raise the noise level to a certain level.

The fame generated by OLX and few other big classified spenders has given rise to many other players. The market is becoming murky, brand image pushed to lowest ebb. With bad PR garnered from their aloof modus operadi, many buyers with real money would rather go to brick and mortar stores and a tiny fraction would go to eCommerce sites to buy directly. With many look alike names, an average customer is now spoilt for choice on where to buy. Sellers now post their ads in several sites to get sales fast. In the end who loses?

The truth is classifieds is not a bad idea, but folks betting big on it might be making a big mistake. No one can really make a kill from operating the largest classified site as the business model is now flawed. Making the site free is not a good way in the long term. Ad-funded model is not a bad idea, but it has to offer a unique value, the margins might also be too small considering the amount cash that might be spent to get the huge traffic that click ads.

Chekki.com.ng from the outset, the site did not follow the bandwagon by not charging either the seller or buyer. The site charges all sellers on it site to post with a duration for all ads. While Chekki might cave-in to pressure from all other sites doing it for free, this is the real model of classifieds not the ‘everything is free’ business model that is being touted today. The truth is, the idea of classifieds sites was from the old newspaper that we still read. It might be cheaper for all advertisers, but newspaper owners charge for every ad in their classifieds section.

There is a clear cut proof to show that we are already in a ‘classifieds’ bubble’ but newcomers will not know it. Many investors and startups will still enter this black hole. Classifieds is good but it has to be done right. Somebody has to pay for something. The monetisation has to be worked into the scenario.