Gumtree is a British-based online classified advertisement and community website founded by Michael Pennington and Simon Crookall in 2000. The site was created to allow Australian, New Zealand, and South African ex-pats to connect in London.
Gumtree charges listing fees to sellers for products in certain categories. To increase product visibility, the company also sells three paid ad packages with extra perks such as larger search result images and highlighted listings.
Gumtree also sells advertising to interested brands according to the number of ad views they desire. Ads appear on the home page, search results page, and “view items” page.
The term “gum tree” is used to describe eucalyptus trees, which are native to Australia but can also be found in New Zealand and South Africa.
Pennington and Crookall decided on this term because they thought it best reflected the roots and branches of a real community.
Origin story
Gumtree is a British-based online classified advertisement and community website founded by Michael Pennington and Simon Crookall in 2000.
The platform was initially created to connect the more than 1 million Australian, New Zealand, and South African ex-pats who were living in London.
Gumtree enabled these individuals to receive much-needed assistance with accommodation and employment, with many others using the platform as a place to make new friends.
Gumtree.com went live in March 2000 at a time when most people accessed the internet from work and not from home.
To drive traffic to the website, the co-founders placed adverts in several newspapers and distributed flyers around London.
Three years later, Gumtree was more popular with Londoners than it was with the ex-pats for whom it was created.
Pennington and Crookall started charging employers to place job ads on the site but kept it free for individual users.
Gumtree had spread to 31 different cities around the world by 2005, including Adelaide, Durbin, Paris, and Edinburgh.
The business was now profitable and employed a skeleton crew of just 12 people in a London headquarters.
Sensing an opportunity, eBay acquired Gumtree that same year for an undisclosed sum, though the deal was part of a larger purchase of three online classified sites worth $81 million.
The co-founders then departed from the business and later founded the Russian and Ukrainian classifieds site Slendo.
As an online classifieds platform, Gumtree makes money via listing fees, production promotion fees, and advertising fees.
Before we move on, it is important to note that exact pricing depends on the country, city, and the product that is listed.
Listing fees
Listing fees comprise the bulk of company revenue.
While most products can be listed for free on Gumtree, the company does charge a listing fee to sellers in several categories. These include real estate, employment opportunities, services for hire, cars and other vehicles, boats, and jetskis.
Product promotion fees
Sellers can also choose between three paid options to increase their buyer exposure:
Plus – with unlimited edits, up to 10 photos, a highlighted listing background, and a link to the seller’s website if applicable.
Featured – with all Plus features in addition to a maximum of 20 photos, a bigger image in search results, and Top Ad functionality.
Premium – with extra features including a homepage gallery and 3 large images in search results.
Gumtree also allows sellers to buy the features from these packages individually.
Below we have explained some of them in more detail:
Bump Up – where the ad is moved to the top of the category for extra visibility to help the seller get more visitors and replies to their listing.
Highlight – where a darker yellow background is applied to the listing to make it stand out. With greater visibility, these ads receive more views and may be run for 7, 14, or 21 consecutive days. The 7-day option in Australia, for example, costs $3.99.
Price Drop – here, the old price is highlighted in red to alert buyers that the price has been lowered. When a price drop label has been purchased, it also alerts users who have the ad in their watchlist.
Urgent – for sellers who want to sell an item quickly, a red urgent icon can be affixed to the upper-left corner of the listing.
Top Ad – the Top Ad section is a dedicated space above normal search results with room for only six listings. These ads tend to receive more interest from buyers because of their prominent position on the top of a category listing page.
Advertising fees
Advertising is also sold on Gumtree, enabling individuals and businesses to target specific product categories and locations.
This can be achieved with a 728×90 pixel leaderboard or a 300×250 pixel banner, with both forms appearing on the home page, search results page, and “view Items’ page.
Pricing is determined by the desired volume of ad views. For instance, advertisers can pay $250 for 25,000 views or $3,000 for 300,000 views on the Australian platform.
Key Highlights
Gumtree’s Origin and Purpose: Founded in 2000 by Michael Pennington and Simon Crookall, Gumtree is a British-based online classified advertisement and community website. It initially aimed to connect Australian, New Zealand, and South African ex-pats in London, helping them find accommodation, employment, and make friends.
Name Origin: The term “gum tree” refers to eucalyptus trees found in Australia, New Zealand, and South Africa. The founders chose this name to symbolize the roots and branches of a real community.
Growth and Business Model Evolution: Gumtree started with the intention of serving ex-pats but quickly gained popularity among Londoners. The platform went live in 2000 and used advertising to drive traffic. It expanded globally, reaching cities like Adelaide, Durban, Paris, and Edinburgh. eBay acquired Gumtree in 2005 as part of a larger purchase of online classified sites. The founders left the business and founded another classifieds site.
Revenue Generation and Business Model: Gumtree generates revenue through various methods:
Listing Fees: While many product listings are free, the company charges listing fees for categories like real estate, vehicles, services for hire, and more.
Product Promotion Fees: Sellers can opt for paid packages to increase product visibility, with options like Plus, Featured, and Premium.
Individual Features: Sellers can also purchase individual features like Bump Up, Highlight, Price Drop, Urgent, and Top Ad to enhance their listings.
Advertising Fees: Gumtree sells advertising space for specific product categories and locations, offering options like 728×90 pixel leaderboard or 300×250 pixel banner ads on various pages.
Different Pricing by Country and City: The pricing structure for listing fees, promotion packages, and advertising fees varies based on the country, city, and type of product.
Ad View Advertising: Gumtree sells advertising based on desired ad views. Advertisers can pay for a specified number of views, and the pricing is determined by the volume of views they want.
Business Model Element
Analysis
Implications
Examples
Value Proposition
Gumtree’s value proposition centers on providing a free and user-friendly platform for buying and selling goods and services locally. For Sellers, Gumtree offers: – Free Listings: The ability to post ads without incurring fees. – Local Reach: Access to a local audience for efficient selling. – Easy Posting: A user-friendly platform for creating and managing listings. For Buyers, Gumtree provides: – Wide Variety: A wide range of products and services available locally. – Cost Savings: Potential to find deals and save money. – Local Convenience: Buying from nearby sellers for easy pickups. Gumtree’s value proposition focuses on simplicity, accessibility, and cost-effectiveness for both buyers and sellers.
Offers a free and user-friendly platform for buying and selling locally. Provides free listings for sellers without added fees. Facilitates access to a local audience for efficient selling. Offers a wide range of products and services for buyers. Enables cost savings and local convenience for buyers. Attracts users looking for a straightforward and cost-effective way to buy and sell locally.
– The free platform removes financial barriers for sellers, encouraging ad listings. – Local reach ensures efficient selling and buying within communities. – A wide variety of listings appeals to diverse consumer needs. – Cost savings attract budget-conscious buyers.
Customer Segments
Gumtree serves two primary customer segments: 1. Sellers: Individuals and businesses looking to post advertisements for products and services. 2. Buyers: Individuals and businesses seeking to purchase products and services locally. Gumtree customizes its platform to cater to the unique needs of both segments. Sellers can easily create and manage listings, while buyers can browse a diverse range of products and services. The local focus ensures efficient transactions within communities.
Serves two main customer segments: 1. Sellers: Individuals and businesses posting ads for products and services. 2. Buyers: Individuals and businesses looking to make local purchases. Customizes the platform to meet the specific needs of each segment. Provides user-friendly listing tools for sellers. Offers a wide range of products and services for buyers. Focuses on local transactions for efficient buying and selling.
– Catering to two customer segments creates a balanced marketplace. – Tailoring the platform enhances user satisfaction and engagement.
Distribution Strategy
Gumtree’s distribution strategy is primarily digital and internet-based. Users access the platform through the Gumtree website and mobile app, available on smartphones and tablets. Sellers can easily post ads, and buyers can browse listings, communicate with sellers, and make transactions through the app. Gumtree also leverages search engine optimization (SEO) to ensure that its website ranks well in search engine results, increasing its online visibility. Additionally, the platform uses email notifications and social media to engage with users and promote listings.
Relies on a digital and internet-based distribution strategy. Offers access through the Gumtree website and mobile app. Facilitates ad posting, browsing, and transactions through the app. Utilizes SEO for enhanced online visibility in search engine results. Engages with users through email notifications and social media to promote listings.
– Digital and internet-based distribution aligns with the widespread use of smartphones for online activities. – SEO efforts enhance platform visibility and attract users. – Email notifications and social media engagement drive user engagement and listing promotions.
Revenue Streams
Gumtree generates revenue primarily through premium ad listings and promoted ads: 1. Premium Ad Listings: Sellers can pay for premium ad listings to enhance their visibility and reach more potential buyers. 2. Promoted Ads: Sellers can promote their ads to appear prominently in search results and browse pages. These revenue streams contribute to the platform’s income. Gumtree may also offer other optional services for a fee, such as ad enhancements and ad reposts.
Relies on revenue streams from: 1. Premium ad listings for enhanced visibility. 2. Promoted ads to appear prominently in search results. Offers optional services like ad enhancements and reposts for additional fees. Diversifies income sources through premium listings, promoted ads, and optional services.
– Premium ad listings offer enhanced visibility and attract sellers looking to boost their ads. – Promoted ads provide sellers with increased visibility in search results. – Optional services generate additional income while providing value to sellers.
Marketing Strategy
Gumtree’s marketing strategy includes digital advertising, search engine optimization (SEO), and community engagement. The platform uses targeted digital advertising to reach potential buyers and sellers, promoting its free and user-friendly platform. SEO efforts ensure that Gumtree’s website ranks well in search engine results, increasing its online visibility. Gumtree also engages with the community through social media platforms like Facebook and Twitter to maintain a strong online presence and foster user engagement. Additionally, email notifications and newsletters keep users informed about new listings and promotions.
Utilizes digital advertising, SEO, and community engagement for marketing. Uses targeted digital advertising to reach potential buyers and sellers. Invests in SEO efforts to enhance online visibility in search engine results. Engages with the community through social media platforms to foster user engagement. Sends email notifications and newsletters to keep users informed about new listings and promotions.
– Online advertising and SEO efforts increase platform visibility and attract users. – Community engagement builds a strong online community and maintains an active user base. – Email notifications and newsletters keep users informed and engaged with the platform.
Organization Structure
Gumtree’s organizational structure includes teams dedicated to product development, technology, marketing, customer support, and ad quality management. Product development and technology teams focus on enhancing the platform’s features and user experience. Marketing teams promote Gumtree’s services and engage with the community. Customer support teams assist users with inquiries and issues. Ad quality management teams ensure the quality and compliance of posted advertisements. Gumtree’s structure supports innovation, user satisfaction, and effective ad quality control.
Employs specialized teams for product development, technology, marketing, customer support, and ad quality management. Enhances platform features and user experience through product development and technology teams. Promotes services and community engagement through marketing teams. Assists users with inquiries and issues via customer support teams. Ensures ad quality and compliance through ad quality management teams. Supports innovation, user satisfaction, and effective ad quality control.
– Specialized teams ensure a user-friendly platform with evolving features. – Marketing teams drive user engagement and community growth. – Customer support enhances the user experience and trust in the platform. – Ad quality management ensures the integrity of posted ads.
Competitive Advantage
Gumtree’s competitive advantage lies in its simplicity, cost-effectiveness, and local focus. The platform’s straightforward and free listing process encourages ad postings, attracting a wide variety of sellers. The local focus ensures that buyers can find products and services nearby, promoting efficient transactions. Gumtree’s user-friendly interface and cost-effective approach make it an appealing choice for both buyers and sellers in the classified ads market.
Derives a competitive advantage from: – Simplicity and user-friendliness of the platform. – Cost-effective listing options, including free listings. – Local focus for efficient and convenient transactions. – A wide variety of listings attracting diverse users. Attracts users seeking a straightforward and cost-effective platform for local buying and selling. Supports efficient local transactions and appeals to a broad user base.
A platform business model generates value by enabling interactions between people, groups, and users by leveraging network effects. Platform business models usually comprise two sides: supply and demand. Kicking off the interactions between those two sides is one of the crucial elements for a platform business model success.
A marketplace is a platform where buyers and sellers interact and transact. The platform acts as a marketplace that will generate revenues in fees from one or all the parties involved in the transaction. Usually, marketplaces can be classified in several ways, like those selling services vs. products or those connecting buyers and sellers at B2B, B2C, or C2C level. And those marketplaces connecting two core players, or more.
A network effect is a phenomenon in which as more people or users join a platform, the more the value of the service offered by the platform improves for those joining afterward.
In an asymmetric businessmodel, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus have a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility.
In an asymmetric businessmodel, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus having a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility. This is how attention merchants make monetize their business models.
The wholesale model is a selling model where wholesalers sell their products in bulk to a retailer at a discounted price. The retailer then on-sells the products to consumers at a higher price. In the wholesale model, a wholesaler sells products in bulk to retail outlets for onward sale. Occasionally, the wholesaler sells direct to the consumer, with supermarket giant Costco the most obvious example.
A retail business model follows a direct-to-consumer approach, also called B2C, where the company sells directly to final customers a processed/finished product. This implies a business model that is mostly local-based, it carries higher margins, but also higher costs and distribution risks.
A B2B2C is a particular kind of business model where a company, rather than accessing the consumer market directly, it does that via another business. Yet the final consumers will recognize the brand or the service provided by the B2B2C. The company offering the service might gain direct access to consumers over time.
The term “crowdsourcing” was first coined by Wired Magazine editor Jeff Howe in a 2006 article titled Rise of Crowdsourcing. Though the practice has existed in some form or another for centuries, it rose to prominence when eCommerce, social media, and smartphone culture began to emerge. Crowdsourcing is the act of obtaining knowledge, goods, services, or opinions from a group of people. These people submit information via social media, smartphone apps, or dedicated crowdsourcing platforms.
While the term has been coined by Andrew Lampitt, open-core is an evolution of open-source. Where a core part of the software/platform is offered for free, while on top of it are built premium features or add-ons, which get monetized by the corporation who developed the software/platform. An example of the GitLab open core model, where the hosted service is free and open, while the software is closed.
Open source is licensed and usually developed and maintained by a community of independent developers. While the freemium is developed in-house. Thus the freemium give the company that developed it, full control over its distribution. In an open-source model, the for-profit company has to distribute its premium version per its open-source licensing model.
The freemium – unless the whole organization is aligned around it – is a growth strategy rather than a businessmodel. A free service is provided to a majority of users, while a small percentage of those users convert into paying customers through the sales funnel. Free users will help spread the brand through word of mouth.
A freeterprise is a combination of free and enterprise where free professional accounts are driven into the funnel through the free product. As the opportunity is identified the company assigns the free account to a salesperson within the organization (inside sales or fields sales) to convert that into a B2B/enterprise account.
In a franchained businessmodel (a short-term chain, long-term franchise) model, the company deliberately launched its operations by keeping tight ownership on the main assets, while those are established, thus choosing a chain model. Once operations are running and established, the company divests its ownership and opts instead for a franchising model.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
