The story of trademe.co.nz’s humble beginnings will make you laugh and then punch someone close by. Its founder –the now incredibly wealthy- Sam Morgan was looking to buy a second-hand heater online for his flat in Wellington. I only hope that heater is now smugly encased under glass in the foyer of trademe’s headquarters because a scant ten years later the online classified listings it inspired have netted Morgan a minimum of $227 million dollars -to add to his already considerable fortune.

Here are some figures about trademe’s place in the New Zealand online landscape: It is the most visited website in the country. It accounts for 60% of all internet traffic in the country. It currently accounts for 90% off all profit made locally on the internet. It is –without a doubt- the juiciest piece of online real estate in the country.

But is 700 million NZ dollars – almost double Fairfax’s annualized advertising revenue in New Zealand – too much to pay? Quoted in the NZ Herald, Shaw Stockbroking media analyst Greg Fraser said “It has a sniff of a panic buy. New Zealand is a small market and I can’t see what they can do to grow the business.” With well over a million registered users -in a country of four million- Mr. Fraser may be right. If you cut out those that are too old, too young, too poor, in prison or do not speak English you are not left with very many people who can register as trademe users. The website already has the majority of active kiwi internet users’ time online. (I bought the coffee table I am sitting at for NZD$5 from trademe. The vacuum cleaner I will use to clean up the food I just spilt was bought for NZD$20 –Still in the box!)

If Fairfax cannot reasonably expect to grow the number of users beyond where it currently sits, then was this decision an attempt to protect their declining revenue from print classifieds? Perhaps, but is spending $750 million to defend $170 million -and falling- worth of print revenue a good business decision?

Surely there must be another reason to spend so much money. Well… There is. Portfolio selling. Two weeks ago the latest readership figures were released in New Zealand and APN (the company I work for) is soundly spanking Fairfax NZ at almost every level of the market. An example: 85% off all people in the Auckland region –where one in three New Zealanders live- who read a newspaper on the weekend are reading an APN title. With Fairfax buying the last independent newspaper in the country the other week –ironically called The Independent- the New Zealand newspaper game is down to a two horse race. A race Fairfax NZ is losing in the critical regions.
 
What is the quickest way to fudge your market share? Buy 1.2 million users. Pay any price to own 60% of the internet traffic. All those colourful pie charts and endless PowerPoint presentations start to look decidedly healthier. You extend your reach by over a million people overnight.

Now you can offer ‘portfolio selling’ - Put your advertisement in the Sunday Star Times, The Dominion Post, have a banner on trademe – Your friendly advertising account manager can do all of this for you and more. Reach almost every kiwi with money to spend in a single phone call. That kind of national reach is something you just cannot buy –unless you have $700 million. So this incredibly expensive buy is starting to look like a good business decision after all.

What is not discussed is that this is a startling example of diminishing diversity of media ownership. Those words typically conjure up images of Murdoch’s unstoppable consumption of just about every British newspaper. But can it be an issue of media ownership when the media in question is a website where kiwis sell each other any back-of-the-garage crap that is not completely coated in feces or currently on fire? I mean, there is not even any editorial of the page.

Yes. After trademe reached a certain size it became so much more than a place where you can buy a second hand heater for your crummy apartment. It has a thriving online community. Some people are now fulltime trademe traders. Trademe’s message boards are now without a doubt the most vibrant democratic space in New Zealand’s online environment. People fall in love, talk through problems, and suggest alternative driving routes when traffic is bad. Basically it is a forum to discuss almost anything. A message board on a classified website does not have any content guidelines beyond ‘do not post anything illegal’. But Fairfax does. Any newspaper does. Newspaper content must be carefully monitored so as not to upset major advertisers. And the major advertisers are on their way.

On March 7 NBC announced that it was going to buy iVillage (US$600 million) with a view to delivering its television content to its millions of active female users. News Corp has already purchased the largest online social networking site, Myspace. Viacom already owns several major websites. Jason Calacanis –founder of weblogs- said to Newsweek: “What you’re seeing in the marketplace is that the bigger companies, the Yahoos, the AOLs, the Microsofts, the Googles, are getting better at buying smaller.” Internet advertising is now the second fastest growing advertising sector (after Hispanic media) and is set to grow by 9% by the end of the year. This kind of money is something the major players cannot afford to pass up.

Quoted in the New Zealand Herald, Jupiter Research analyst David Card says “the future of media is that audiences –and advertisers- want their content services from the same brand across multiple platforms.” In trademe’s case this means that –down the line- it will ultimately be bound by Fairfax NZ content guidelines and other corporate decisions. Even if these changes are slight it is still a sad day for the democratization of the internet. The site’s grassroots community ethic is gone forever. If, like me, you have studied Australian media at a tertiary level you will know how companies like Fairfax behave. Trademe’s reserve price has well and truly been met, but the buyer does not exactly have a one hundred per cent positive feedback rating.