How Mark Zuckerberg is turning Facebook Marketplace into an e-commerce empire

“It gives people the opportunity to bring home some really rare or one-of-a-kind items that they otherwise wouldn’t have if they couldn’t make it to a flea market or estate sale,” Gaskill said Fortune.

Facebook Marketplace has become more than just a trusted source of second-hand information in Los Angeles. It has become a real contender to compete with established e-commerce sites. Facebook’s monthly active users (MAU) rose to 3.07 billion at the end of 2023, up 3% year-over-year. According to the March Capital One Shopping report, as many as 40% of them, or 1.2 billion, are active users shopping on Marketplace.

Online second-hand goods marketplace Meta is already challenging the industry’s goliaths. Marketplace eclipsed Craigslist’s MAUs years ago, with Meta CEO Mark Zuckerberg saying in 2018 that there were 800 million Marketplace MAUs compared to 55 million visitors to Craigslist in 2017. By contrast, Amazon had 310 million users, according to the technology report approximately one-quarter of Marketplace MAUs per month in 2023. According to a 2022 Statista report, Marketplace is the second most popular used shopping site after Ebay.

“This is a growth area,” said Charles Lindsey, a marketing professor at the University at Buffalo School of Management Fortune. “I wouldn’t be surprised if it actually overtook Ebay in three or five years.”

Amazon and Ebay did not respond Fortunerequest for comment.

From an online garage sale to an e-commerce giant

Lindsey argued that Marketplace’s astronomical growth is largely due to the fact that the platform is simply easy to use and connected to a site that so many people are already members of.

“There is a trust factor because it is associated with Facebook,” he said. “It has an easy-to-use interface. It’s integrated with Facebook Messenger, so it’s easy to move back and forth.”

Launched in 2016, Marketplace was originally intended to facilitate sales among neighbors – most users offered a used item for sale at a reasonable price, and buyers picked up the item and arranged pickup and payment with the seller via Facebook Messenger. However, Marketplace grew into a powerful e-commerce platform, and by 2018, one in three Facebook users in the US used it. During the pandemic, Marketplace has exploded thanks to increased reliance on e-commerce and the supply chain, and shipping delays that have hampered traditional shopping experiences.

“We’re seeing everyone from artisans who make handmade goods to woodworkers to car dealers thrive,” said Deb Liu, founder and then vice president of Marketplace Modern retail in 2021

By then, Marketplace had become a boon not only for frugal shoppers, but also for small businesses looking for unique sales opportunities. Springfield, Missouri-based Beautiful Fight Woodworking generated $168,000 of $266,000 in revenue in 2020 solely through Marketplace sales.

The platform is certainly not without its major problems, especially as scammers and bot accounts spread the site, making it difficult for well-meaning buyers. One user from South Carolina claimed in February that he was scammed out of $18,000 after listing his 2016 Audi on Marketplace. A 2022 thinkmonkey survey of 1,000 Brits found that one in six have been scammed on the platform.

“What happens offline often spills over into online environments, which unfortunately includes fraud,” said Ryan Daniels, a spokesman for Meta Wire. Meta said it was working “aggressively to quickly identify, disable and block fraud and associated accounts.”

Gen Z’s new favorite social media

Thanks to its popularity, Marketplace has won over a generation of young people who have largely turned away from Facebook.

“I look at it as a social media app,” said Dre Vez, a 25-year-old content creator Fortune.

Vez spends about six to 12 hours a day on Marketplace, where he makes a living by “trolling” sellers, asking them to read voice notes to test the product before uploading the interactions to TikTok for his 755,000 followers.

He believes that Marketplace is not only a fodder for entertaining videos, but also a true social media tool for Gen Z and Millennials because it provides fast-paced and highly stimulating activities.

“It’s an opportunity to have several interactions in a short period of time where I can go to the Facebook marketplace, search for a bike and contact 7-10 different people and continue all these conversations at the same time,” he said.

Even on days when he can’t find a good deal, Vez finds some laughter on the site. Sellers can get away with offering used nail clippers, toilet brushes and plungers for sale – he mentions that even a face-shaped Dorito goes for $10,000.

Meta drew attention to its enthusiastic young users. Although Facebook’s popularity among teens has declined in the wake of TikTok’s rise, Facebook now has more than 40 million young adult users aged 18 to 29 in the U.S. and Canada, a three-year high, with one in four using Marketplace, she said Meta Fortune.

For the Gaskilla second-hand connoisseur, who checks the Marketplace five to 10 times a day, the platform appeals to young people because it appeals to their desire for independence, saving money and protecting the environment from the burdens of mass production and transportation.

“Given the economic situation, but also the mindset of Gen Zers, they love uniqueness and self-expression,” he said. “But they also really like finding things at a good price.”

Finding room to grow

But just because Meta boasts a growing following on its Marketplace platform doesn’t mean it’s a lucrative arm of the company. Meta didn’t respond Fortuneasked for comment on how to make money through Marketplace, but marketing professor Lindsey suggests the company benefits from transaction fees for sellers as well as increased attention to advertising on the site.

“Generally speaking, the more likely someone is to use Facebook Marketplace, the more likely they are to log into Facebook that many times a month,” he said. “Facebook then takes advantage of that by allowing companies to pay for ads, which then go to my feed, go to your feed.”

According to an SEC filing from December 2023, the European Commission alleged in December 2022 that Facebook and Marketplace were combining data and using data in a way that violated EU competition rules.

Sucharita Kodali, a retail industry analyst at research firm Forrester, says the market is an important piece of Facebook’s financial puzzle in part because its local exchanges are cheap – especially compared to Ebay, which requires massive international infrastructure.

“It’s a huge volume of transactions,” Fortune said. “With this volume of transactions comes the need to invest in a lot of automation, customer service, seller management, seller tools, etc.”

While Facebook Marketplace doesn’t need a complicated system to manage local transactions, that also means it probably doesn’t make as much money as its e-commerce competitors. In fact, Kodali went so far as to call Marketplace an “anti-commerce” platform because it contains so many “buy nothing” groups and peer-to-peer exchanges. She took a similar stance to Lindsey, arguing that the financial advantage of the platform was better targeting of active users.

“It’s not really about, ‘Let’s make money off the number of posts we see in the marketplace section,’” she said.

Marketplace’s virtual garage sale atmosphere and the platform’s sense of community may not bring in Meta billions of dollars, but it’s what keeps users coming back to the site.

“You never know when the next amazing thing will come along,” Gaskill said. “That’s the fun of it all. That’s what makes it addictive.”