Last week’s passing of Frank Batten, the founder of Landmark Communications, reminded me of a small insight he had about the Internet back in 1996 that rings true today.
Frank was participating in a meeting that I was leading as a vice president trying to navigate this new thing called the Internet. We were strategizing what we might do with our properties – The Weather Channel, Auto Trader, Antique Trader magazine, TV stations and daily newspapers. The discussion led to all the extra money we might make at Auto Trader by charging dealers an extra $5 per listing. As we were rubbing our hands together, Frank gently weighed in.
There’s no barrier to entry on the Internet, he observed. No million-dollar printing press to prevent any fool from competing, no FCC license like you might find in TV or radio, no cable franchise to form a protective moat around your business. So in that scenario, the only strategic competitive advantage seems to be size. Frank wondered whether we might need to get big fast instead of limiting the number of listings to only those dealers who would accept the $5 fee. Placing all listings online, he suggested, might give us an immediate “category killer” for autos.
He was spot-on. Within 18 months, Autotrader.com was born. It immediately became a category killer. Today it is (by far) the No. 1 automotive Web site in listings and revenue, with more than 3 million vehicle listings and more than $600 million in revenue. While most automotive sites suffered horribly in 2008, Autotrader.com grew 20 percent and actually surpassed revenue from the Auto Trader books.
Frank’s strategy was a great one. It not only explains the success of sites such as Craigslist, which is generating more than $100 million off “free listings,” but also probably foretells the disappointment that awaits those who expect to find success as a “category killer” in local content by charging users to access it.