Classified businesses, much like auctions, are a game of network size. Get big first, you win, even if you have an inferior product.
In Canada, Craigslist took a little longer to catch on. Ebay noticed this, and therefore "picked up the pace" by spending TONS of money acquiring Kijiji visitors (mostly via SEM, but some display on major portals as well).
Long story short - if your business model depends on network effects, raise enough money to get big fast, as your basically racing to reach, not competing on product.
Great observation. The article never mentions anything about "first mover" or "network effect". It seems completely bought into the fallacy that intrinsic product quality is what determines the winner in a market.
In Canada, Craigslist took a little longer to catch on. Ebay noticed this, and therefore "picked up the pace" by spending TONS of money acquiring Kijiji visitors (mostly via SEM, but some display on major portals as well).
End result? Kijiji is #1 in Canada, and Craigslist is trending down in traffic - http://trends.google.com/websites?q=craigslist.org%2C+kijiji...
Long story short - if your business model depends on network effects, raise enough money to get big fast, as your basically racing to reach, not competing on product.