eBay-owned Gumtree is celebrating its 10th birthday in Australia as an online classifieds site with new branding and search functions that will make it more competitive in the lucrative second-hand car sales market and see it launch a dedicated jobs site for the first time.
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The upgrades bring Gumtree into sharper competition with Carsales.com.au and includes searches by colour and model. Currently Gumtree does not charge for car listings and is commonly used for sales under $10,000. Recently Carsales started offering free private listings for cheaper cars to be more competitive.
Analysts estimate Gumtree overtook Carsales.com.au for private listings in 2014 and has been eating into its earnings growth. Earlier this year Gumtree had about 340,000 car listings, including car parts, compared to about 200,000 on Carsales.
"This is the most significant step in Gumtree's 10 years in Australia," general manager Martin Herbst said.
"While we knew our users were ready for a sleeker and more contemporary design, a rebrand has to be more than a new lick of paint. We wanted to ensure we addressed some of the areas our users, and non-users, said could improve their experience on our site and in our community," he added.
About 7 million Australians visit the site every month, according to Gumtree. The site started in the UK and operates across several Commonwealth countries, such as South Africa, Canada and Singapore.
However, in Australia Gumtree's free and open market is notorious for scams and time-wasters across all categories. As part of the re-branding it has introduced PayPal transfers and 24-hour customer support.
Chief executive of Carsales.com.au, Cameron McIntyre, said it "respects all of our competitors", when asked about Gumtree's rebranding.
"As a business we don't tend to focus on what other competitors are doing in the market. We tend to focus on what we are doing as market leaders. [And] on what are doing in a more trusted environment."
A note from Morgan Stanley analysts earlier this year found online competitors like Gumtree have been eating into Carsales' earnings growth from private sale display ads.
While Carsales enjoyed earnings growth of between 12 per cent and 15 per cent overall, most of this came from its international division, according to the analysts. The display and private sale ads had earnings growth of between just 2 per cent and 5 per cent.
Carsales introduced free ads for cars priced under $3000 about 18 months ago, then recently increased the free ads to cars under $5000.
"We saw we were having such a good impact on $0 to $3000 and we knew the sweet spot was $0 to $5000 so we decided to extend it," Mr McIntyre explained.
"Cars under $5000 tend to move pretty quickly. The volumes on cheaper cars are quite good."
Vendors selling cheaper cars tend to look for an upgrade at the same time and will do so within the same website, he added.
Morgan Stanley's team said it forecasts "modest top-line and earnings growth for Carsales' private seller division".
"Firstly, there is the online migration of previous print ad spend drawing to a conclusion (over 90 per cent done by our estimate)," they wrote in a note to clients.
"Secondly there is an increasingly competitive operating landscape for Carsales ... specifically, we cite eBay [and] Gumtree's impressive growth in free online listings on its site, diminishing Carsales' pricing power for its Private Seller division ... and additionally we note the increasing presence of Facebook and Google/YouTube and other global ad tech companies in competing for auto manufacturers' adspend."
