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.
Where does the name come from?
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.
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.
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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.
