Why Facebook’s new Marketplace is a nightmare for eBay and Etsy

On Monday, Facebook (FB) announced that it would revive Facebook Marketplace. But this time, the buy-and-sell platform is mobile-only.

This move is meant to encourage people to spend even more time on the social media site. And now, using a built-in location tool, users can sell gently-used bluetooth headphones or buy a cool new bike in their neighborhoods. Facebook does not actually get involved in facilitating the financial transaction; it’s just offering a way for people to list things they no longer want or need.

Not Facebook’s first Marketplace rodeo

If this concept sounds eerily familiar, it’s because you’ve heard it before. This is Facebook’s second shot at tackling the second-hand market. The first iteration of Marketplace was launched in 2007 and was met with a lukewarm (or nonexistent) response. Just a year and a half after later, Facebook decided to revamp it by turning to classifieds startup Oodle to power the platform and “further expand the functionality and breadth of the application.” In 2014, however, that version was shut down because it didn’t gain enough traction.

Facebook then transformed the Marketplace concept to “For Sale Groups” that allow individuals to create groups to buy and sell items online. According to Facebook, 450 million people are currently buying and selling goods on the platform. When it launched, Marketplace’s main competitor was Craigslist, when Facebook had a mere 50 million active monthly active users. Now, with a whopping 1.71 billion monthly active users (1.57 billion monthly active users on mobile alone), the social network has the breadth and scale to give it another go-round.

What’s different about Marketplace 2.0?

Though Marketplace is still in beta mode, Facebook has been working on developing this bigger and better platform for over a year. It’s launching in the US, UK, Australia and New Zealand for now. Eventually, depending on how well it’s received, Facebook plans to roll out a web version and expand globally.

The company is aggressively promoting Marketplace, so much so that it is taking the main spot in the navigation tab on the Facebook app, replacing the shortcut for Messenger. This not only puts Marketplace prominently on the map, but it also encourages users to download the standalone Messenger app.

How behemoths are winning the peer-to-peer marketplace

Beyond tapping into existing Facebook and Craigslist users, this move is a direct stab at the eBay (EBAY) customer. In fact, shares of eBay were trading sharply lower on the news on Monday morning.

The main differentiator for Facebook, however, is that there is a sense (or at least the illusion) of being part of a semi-controlled community. Users have already created closed groups of niche communities—like Bergen County Moms Buying and Selling, where Northern New Jersey parents sell their old strollers or buy never-worn onesies, and Buying and Selling KPOP, where Korean pop music fans hawk tickets to performances.

Similar to dating apps like Coffee Meets Bagel, which only matches you to someone with whom you share at least one mutual friend on Facebook, Marketplace will likely appeal to those who only want to interact with people they have a connection to—even if it’s vague at that. At the very least, you can get a quick scan of people’s profiles and get a general sense of who they are, based on their workplace and education.

Facebook is also joining the likes of Amazon (AMZN), which launched “Amazon Handmade” last October. The site allows individuals to sell items like furniture, kitchen items, artwork and other homemade goods, and the e-commerce behemoth says it now sells 500,000 handcrafted items on the site. Last week, Amazon announced that it would be expanding into Europe and will start by listing 30,000 handcrafted items made by European artists and artisans. Amazon, however, does take a 12% fee from sales.

Of course, Amazon and Etsy (ETSY) are catering to a global audience that’s ravenous for artisanal and crafty gifts. Though Facebook’s Marketplace is currently only tapping into the secondhand market, it has the potential to include local vendors. Perhaps community artists and artisans will be able to use the platform to sell their handmade jewelry, pottery or other items.

Marketplace could be the perfect go-to site, especially if you’re in a pinch to find a unique vintage gift. Facebook emphasized in its announcement that it wants users to be able to discover items (a.k.a. the Amazon-effect of buying something you never knew you needed) that you could pick up from someone’s apartment instead of rummaging through a boutique.

Facebook is smart to take advantage of its existing ecosystem. The average time that users spend on Facebook is 50 minutes. Now, with the relaunch of Marketplace, Facebook has developed a seamless way to hold our gaze for a bit longer.

Melody Hahm is a writer at Yahoo Finance, covering entrepreneurship, technology and real estate. Follow her on Twitter @melodyhahm.

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