TorStar Goes With LiveDeal for Local Auctions

For a short time, eBay experimented with a Local Trading unit, which specialized in autos, sofas and other things “too heavy to ship.” But in 2001, it closed down the unit, which didn’t fit into its plans for eBay Autos, greater transaction fees, etc. By doing so, eBay took the chance that it would be left vulnerable to competitors filling the void.

Sure enough, jump to 2005, and a flurry of companies are ready to take advantage of the increasingly clear relationship between local auctions, classifieds and transactions. One of them is Santa Clara-based LiveDeal.

Launched by a former eBay engineer in 2003, the 25-person company lists 200,000 items for sale, and gets about 500,000 unique viewers in a month. LiveDeal’s big news this month is that it has landed $4.8 million in financing, including $3 million from TorStar, the progressive publisher of The Toronto Star and dozens of smaller community and daily papers in Ontario. Other investors in this round include Draper Richards, a prominent VC firm, and individual Silicon Valley investors.

We had the opportunity to talk with Vice President of Corp. Development Steve Harmon about the company’s progress. Harmon, a former Jupiter analyst and money manager, says TorStar was attracted to LiveDeal because of its software, and its free ad model, which brings in enough local traffic to charge for lead generation and advertising.

Unlike eBay, however, transactions aren’t generally part of the mix. “You go test-drive a car, you are not going to go back to your PC and complete the transaction,” Harmon notes. The relatively rare item that does get shipped averages a 20 percent transaction fee.

As for the company’s user base, it appears to be in line with other ecommerce sites, with “a lot of women between the ages of 30-40” in its ranks, says Harmon. That usage is spread out among the various categories, with autos resulting in about a third of lookups – not much different than its share in classifieds, generally. The company has about 100,000 auto listings via AutoNation, the largest used car network.

Looking forward, LiveDeal is also pursing several key local verticals, including the under-exploited college market. “College students need to fill their dorm room” with cheap stuff, Harmon says. “And they’re highly transitory. They’ve got a high turnover.”

Students using LiveDeal either select their school name from a list of over 200 U.S. colleges and universities or simply type in their college town or zip code to browse thousands of new and used items for sale, all close to campus to avoid shipping. Affiliated colleges get $7-$14 per qualified lead for autos and real estate, 7 percent for “buy now” store accounts, and 70 percent of the gross for listing upgrades.

Harmon is currently engaged in a lot of business development, and hopes that TorStar will be just the first of many partner announcements with media (and possibly Yellow Pages) companies. In addition to TorStar, the site has already been working with a dozen or so community papers. Eventually, it hopes to announce additional deals in Australia, India, Ireland, New Zealand and the U.K.

More Media Partners Needed

LiveDeal is full of chutzpah and seems to have gotten off to a good start. To me, however, it isn’t totally clear where LiveDeal fits in the universe. Until it gets more media partners, it will rely on word-of-mouth traffic, and it may have trouble aggregating buyers and sellers in key markets.

The addition of more first-tier media partners like TorStar, will enable LiveDeal to significantly ramp up usage, and shoot past some of the other players in the auction/free classified space. These include Vancouver-based CityXPress, which works with over 250 newspapers, and smaller players such as San Diego-based Ad2Ad, which works with a couple of dozen community papers, an established college network (and yes, full disclosure, Krasilovsky Consulting).

The overarching question, of course, is whether LiveDeal can establish its own space. It might just be setting itself up as a placeholder for the likes of eBay, Google, Amazon or TKG (Tribune/Knight Ridder/Gannett).