eBay Renews Assault on Craigslist with... Buzzwords?

In its Sisyphean quest to undermine Craigslist, eBay (EBAY) is preparing to launch a kind of Star Wars program full of the latest buzzwords: augmented reality, hyperlocal ads, Twitter integration and mobile payments. But the plan has essential flaws: it doesn't mitigate -- or even address -- Craigslist's biggest advantage.

Ebay's trouble with classifieds hasn't always been rooted in incompetence. It runs seven successful classifieds sites worldwide totaling over 80 million monthly visitors, including popular marketplaces like Gumtree, Kijiji, and Marktplaats. It's only in the U.S. that eBay struggles to get classifieds off the ground: eBay Classifieds pulls in a 3.9 million uniques per month, while Craigslist sees over 50 million.

The reason is simple: most of Craigslist's revenue comes from job ads, adult services ads and New York real estate listings, enabling the remainder of Craisglist's services -- like the "for sale" section that eBay would be most comfortable rivaling -- to be available to users for free. Ebay can't compete with free services (and its principals can't seem to kill Craigslist from the inside, either). So the site has opted for another strategy: throw money at fatuous technological solutions.

According to PCMag, eBay Classifieds is working on several. The first is an augmented reality app for smartphones that can show users stuff for sale nearby. (If you've never seen an augmented reality app, it looks basically like Terminator vision, overlaying information on your phone's camera view.) Of course, this initiative ignores the fact that augmented reality apps are really only useful for a spur-of-the-moment search for something walkable: a Starbucks (SBUX) or a subway station, for example. A couch? Used car? No.

Ebay is also reportedly working on integration with PayPal's new mobile payments initiative, which involves nifty software like an iPhone app that lets you bump phones to exchange money. Ebay's masterminds only got this stop-gap half right: yes, mobile payments are expected to become ubiquitous over the next four years. But classifieds buyers are not going to be eager to involve PayPal's fee structure (which can levy a charge of up to 3% of the total amount) in big purchases like used furniture, appliances and collectibles. In classifieds, cash will remain king. If a seller or a buyer wants to use credit card or PayPal that badly, they'll use regular old eBay.com, and opt for local pickup. Why should eBay push a duplicate service?

Another plan of eBay's is to add location awareness to its listings, so that users can see hyperlocal listings by neighborhood. But this is a little bit like using scissors to cut the lawn; that level of precision is overkill. Craigslist does very well by splitting popular zones like the New York metropolitan area and the Bay Area, for example, into its constituent parts: Manhattan, Brooklyn, Westchester, and so on. Whether an item is 1.2 miles away or 3.4 miles away is immaterial; with classifieds, it's the deal that's the draw.

PCMag says eBay is also experimenting with the orchestration of social selling, or sales between friends, by integrating with Twitter and other services. That's a worthwhile avenue, but it's hard to envision how eBay can add any value here. Beyond publishing a Facebook status update or a tweet to all our friends -- "Apartment for Rent" -- how much more work can our Web tools really do?

Craigslist endures serious costs for its business model; just this week it was subpoenaed by the Connecticut Attorney General for its sex ads and excoriated by at least one non-profit for enabling human trafficking. Ebay apparently thinks it needs to achieve sacrificial parity by blowing millions of dollars to compete, but it doesn't have to. Instead of throwing capital at overwrought technological solutions, eBay should keep it simple: make classifieds free in the United States and find another way to monetize them, just as Craigslist does. Ebay's auction site could be on the brink of a real recovery, and has already supplanted classified ads in much of the country. It should put its resources into what it does best and leave Craigslist to its niche.