Classified Advertising Websites – How do they make money from your ads?

Before we talk about Craigslist, USFreeAds, GumTree and eBay Classifieds, let me first share with you these interesting figures related to classified advertising.

According to the research group Statista…

… the global internet classified advertising expenditure is projected to grow from 12.8 billion dollars in 2013 to 15.4 billion dollars by 2017.

… the online classified and directory advertising spending in the Unites States is projected to grow from 2.71 billion dollars in 2013 to 2.95 billion dollars by 2016.

Now, let me ask you these questions: do you post ads on classified advertising websites? Do you pay when you post an ad?

I used to sell stuffs on classified advertising sites and I don’t spend any cent in posting my ads. We all know that posting ads in online classified advertising should be free of any charge. So here’s the big question: how do they make money?

Classified advertising website has a very interesting business model. The truth is that they make a lot of money from our free ads. Unbelievable but true. That’s how stuff really works in this billion dollar online business.

Whether you post ads or respond to ads, learning the basics of classified advertising can help you become a smart advertiser. In this post, I am going to share with you some ideas on how classified ads sites work. While it’s a little bit tricky to analyze Statista’s projection, a little knowledge of this online business can help you become a smart entrepreneur.

The Basics of Classified Advertising

Each site has its own set of rules in ad posting. Despite of that, those rules are set with a common objective in mind – to let the community know that there’s an ad like that. Posting an ad is relatively simple. Here’s how.

Ad Posting. Register an account, click the “post an ad” button, fill out the required fields, and then click “post”. Your ad is now live. People looking for a certain category of advertisement will soon land to your ad page and they will contact you. What’s next is the buy and sell process; some negotiation and it’s a close deal. Once the product (or service) is delivered (in-person, through forwarder, via internet channel, etc.) and the payment has been processed (via escrow, money order, COD, wire transfer, credit card, etc.), you can post another ad again.

Dispute Settlement. Sometimes, problem comes without warning. The item is a prohibited one, the product needs to be recalled, the payment processing failed, the product got damaged, the service was not rendered properly, and the list goes on and on. This is the time when the classified advertising company comes into the action. They have this set of rules, called terms of use, that will aid in the settlement of dispute between the buyer and seller.

Now, let’s talk about the business model.

How do classified advertising companies earn a profit?

Will you sign up for a $10 per month membership in exchange for additional features, extra benefits and useful tools? If you’re already making revenue with your ads, it is best to sign up since that can be the start of a good investment. Otherwise, don’t. Take your time.

Paid membership is actually one of the main sources of income by majority of classified advertising companies. Craigslist offers exclusive membership accounts for ad posters who want to engage in paid block postings.

These are the other methods that provide income to these companies.

Advertisements. Click on the ad banners and texts and it won’t cost you anything. But that activity actually returns money to the classified ad company. Think about the Google Adsense program. That’s where the money is. eBay Classifieds has this advertisement always posted on top of every ad page.

Affiliate Programs. USFreeAds will pay you $1,000 each month if you send them 250 premium members. This is just one of the many affiliate marketing programs. Some sites offer commission-based promotional marketing. Others engage in referral programs. Others engage in Pay-per-Action marketing programs.

Sponsored Ads or Paid Postings. For a certain fee, they will post your ad either on top of the ads listing page, on the popular ads page, or on a specific section of their site which attracts lots of visitors. Gumtree has “Latest Ads in” and “Ads in the Spotlight” sections on its home page. These are the sponsored links areas of the site.

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