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

“It gives an opportunity for people to possibly bring in really rare items or just one-of-a-kind items into their home that otherwise they wouldn’t have had if they couldn’t make it out to a flea market or estate sale,” Gaskill told Fortune.

Facebook Marketplace has not only become a trusted source for LA’s second-hand scene. It’s made itself a real contender to go toe-to-toe with well-established e-commerce sites. Facebook has grown to 3.07 billion monthly active users (MAUs) as of the end of 2023, a 3% year-over-year increase. Of those, up to 40%, or 1.2 billion, are active users shopping on Marketplace, according to a March report from Capital One Shopping.

Meta’s online second-hand market is already challenging the sector’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 the 55 million visitors on Craigslist in 2017. In contrast, Amazon had 310 million monthly users in 2023, per Tech Report, about one-fourth of Marketplace’s MAUs. Marketplace is the second most popular site for second-hand purchases behind Ebay, according to a 2022 Statista report.

“This is a growth area,” Charles Lindsey, associate professor of marketing at University at Buffalo School of Management, told Fortune. “It wouldn’t surprise me if in three years, five years, it actually overtakes Ebay.”

Amazon and Ebay did not respond to Fortune’s request for comment.

From online garage sale to e-commerce giant

Marketplace’s astronomical growth is in large part because the platform is simply easy to use and already linked to a site where so many people are pre-existing members, Lindsey argued. 

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

Launched in 2016, Marketplace was originally a way to facilitate sales among neighbors, with most users offering up a used item for sale at a reasonable price, and buyers picking up the item and coordinating with the seller over Facebook Messenger about collection and payment. But Marketplace grew into a formidable e-commerce platform, with one-in-three U.S. Facebook users on the platform by 2018. Through the pandemic, Marketplace exploded thanks to increased reliance on e-commerce and supply chain and shipping delays that inconvenienced traditional shopping.

“We’re seeing everyone from artisans hand making goods, to wood workers to car sellers thrive,” Deb Liu, founder and then-Marketplace vice president, told Modern Retail in 2021. 

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

To be sure, the platform isn’t without significant problems, particularly as scammers and bot accounts have proliferated the site, giving well-intentioned buyers a tough time. One South Carolina user claimed in February he was scammed out of $18,000 after putting his 2016 Audi up for sale on Marketplace. A 2022 thinkmonkey survey of 1,000 Brits found that one in six had been scammed on the platform.

“What happens offline often makes its way into online environments, and that unfortunately includes scams,” Ryan Daniels, a Meta spokesperson, told Wired. Meta said it works “aggressively to quickly identify, disable, and ban scams and accounts associated with them.” 

Gen Z’s new favorite social media

Through its ascension, Marketplace has won over a generation of young people who had largely turned away from Facebook.

“I look at it like it’s like a social media app,” Dre Vez, a 25-year-old content creator, told Fortune.

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

He finds Marketplace not just fodder for entertaining videos but also as a real social media tool for Gen Z and millennials because it’s fast-paced and highly stimulating.

“It’s the ability to have several interactions in a short duration of time, where I could go on Facebook marketplace, and I could search up for a bike, and I could reach out to seven to 10 different people and have all these conversations going on at the same time,” he said.

Even on days when he can’t find a good deal, Vez finds some laughs on the site. Sellers have gotten away with listing used toe nail clippers, toilet brushes, plungers—even a Dorito in the shape of a face going for $10,000, he recalled.

Meta has taken notice of its enthusiastic young users. While Facebook’s popularity among teens has dwindled in the wake of TikTok’s rise, Facebook now has over 40 million daily young adult users aged 18 to 29 in the U.S. and Canada, a three-year high, with one in four using Marketplace, Meta told Fortune.

To second-hand connoisseur Gaskill, who checks Marketplace five to 10 times a day, the platform is compelling to young people because it appeals to their desire for independence, to save money, and protect the environment against the strains of mass production and freight. 

“Just given the circumstances with the economy, but also just the mindset of like Gen Z, they love uniqueness, and they love self expression,” he said. “But they also really like finding things for a good price.”

Finding room to grow

But just because Meta boasts a growing fandom for its Marketplace platform doesn’t mean its a lucrative arm of the company. Meta did not respond to Fortune’s request for comment on how it makes money through Marketplace, but marketing professor Lindsey suggests the company benefits from seller transaction fees, as well as more eyes on the website’s advertisements.

“Just overall, the more likely someone uses Facebook Marketplace, probably the more likely they also log into Facebook so many times per month,” he said. “Then Facebook capitalizes on that by being able to have companies pay for advertising that then hits my feed, hits your feed.”

The EU’s European Commission alleged in December 2022 that Facebook and Marketplace tie together and use data in a way that infringe on the EU’s competition rules, according to a December 2023 SEC filing.

Marketplace is, in part, an important facet of Facebook’s financial puzzle because its locally based exchanges are low-expense, according to Sucharita Kodali, retail industry analyst for market research firm Forrester—especially, compared to Ebay, which requires a massive international infrastructure.

“It’s an enormous transaction volume,” she told Fortune. “With that transaction volume comes a kind of a necessary investment in a lot of automation, customer service, seller management, seller tools, etc.”

While Facebook Marketplace doesn’t need an elaborate system to manage local transactions, it also means it’s likely not making as much money as its e-commerce competition. In fact, Kodali went so far as to call Marketplace an “anti-commerce” platform because it has so many “buy nothing” groups and peer-to-peer exchanges. She took a similar stance as Lindsey, arguing the financial merit of the platform is to help better target ads for active users.

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

Marketplace’s virtual garage sale vibes and community feel of the platform may not be raking in billions of dollars for Meta, but they’re exactly what keeps users coming back to the site.

“You never know when that next amazing thing is gonna pop up,” Gaskill said. “That’s the fun of it. That’s kind of what keeps it addicting.”