Editor’s note: Guest writer Craig Donato is the CEO of Oodle, a social maretplace that powers the Facebook Marketplace.

Ecommerce today is imbued with the same DNA that runs through Google. It’s automated. It’s algorithmic. It’s certainly not human. And the marketing campaigns that are built with this DNA are similarly data-driven. They employ number-crunchers to capture their leads and build their databases, all the while looking for incremental ROI and arbitrage opportunities.

But a new marketing game has come to town—social commerce. And at its core is an entirely different bit of DNA: the DNA of Facebook. This new variety of social commerce is about conversations. It’s about relationships. It’s about re-humanizing online commerce. And for marketers to succeed with social commerce, they are going to have to rethink their game plan. Facebook has given us a brand new color palette. Now it’s up to us to figure out how to use it. I like to call this learning process “de-ecommercification.”

Succeeding with social commerce requires marketers to act human. Rather than searching for information, consumers are discovering things through trusted referrals and recommendations. Instead of being a marketing medium driven by click-through rates and lead conversion, Facebook is a medium of relationships and conversations. This is going to require some adjustments by marketers, and in this new game they are going to need to:

• Practice the art of conversation. Social commerce is not about capturing leads and building databases. It’s about talking to people with an authentic voice, the same voice you would use if you were talking to them in person.  (Remember, you’re talking to your customers in the same place they use to chat with their friends.)
• Build and deepen customer relationships. Customers are the trusted network, the community that surrounds a business. By taking care of your customers, you not only deepen those relationships, but you also fuel referrals.

It’s true that many other people in our industry besides me talk about “social commerce.” What they are really talking about, though, is “social shopping.” For example, if you were thinking of getting a new video camera, you would probably want to get recommendations from your friends about which one to buy. This is pretty cool, but it’s also very incremental. It’s social icing on the ecommerce cupcake.

Social commerce will have its biggest impact with a different set of businesses—businesses that are naturally “relationship businesses,” and these are easy to spot. They’re typically local businesses, those whose primary form of marketing has always been word-of-mouth referrals: local service providers, real estate agents, landlords and employers.

If you’re looking for a new house cleaner, which would matter most to you:

a) A half-dozen reviews from people you don’t know.

b) A coupon for 10% off the cleaner’s first visit.

c) Two friends that use the same cleaner—and are fans?

Say you’re looking for a new apartment and trying to figure out where to live, do you want lots of data on maps, or advice and recommendations from your friends and co-workers?

While social commerce is going to be disruptive to local businesses, that doesn’t mean it’s going to all be about deals (at least not yet). The DNA of Groupon (despite winning the Crunchie for Best Social Commerce App) is ecommerce while the deals it offers, which are cost-effectively generating leads, are ecommerce icing. In the new realm of social commerce, deals will evolve to serve a different master. They will be focused on deepening the relationships you have with your current customers, and through this end, fueling referrals.

This may sound complicated and confusing, but local businesses should get the hang of this quickly. It’s all very back-to-the-future stuff for them. Great local businesses have always been people-based businesses that understand the power of relationships and the importance of participating in a local community. There’s a reason the car dealership sponsors the local little league team.  What these businesses haven’t yet been able to figure out is how take what they’re already doing in their local communities and transfer it to the new world of Facebook and the Web. But they’re learning . . . and when they do, it will be transformational not only for them, but also for us—their customers.

When Oodle started out six years ago as a classifieds search engine, it’s focus was all around search and bringing together the best classified ads from all over the web. Today, it still does that, but increasingly it is moving more and more towards social classifieds. “We are 100 percent committed to social,” CEO Craig Donato tells me.

Oodle already powers the Facebook Marketplace, perhaps the largest business app on the social network. Of the company’s 14 million total users a month, 6 million are on Facebook. And tonight it plans to roll out a slew of new social features.

In addition to seeing what items for sale your friends are listing on Facebook, you can also see items from friends of friends, and from people who belong to the same networks. (Some of these group buying features come from its recent acquisition of Grouply). You can now also post items just to your friends, and you have the option to lend items or give them away. Donato recently posted that he was looking for a car for his foster daughter. A friend from grad school saw the request and just gave her his old car that he was going to try to sell.

Adding real identities and tapping into your social networks changes the nature of many of these transactions. Donato explains how Oodle is different than other forms of social commerce: “The majority of social commerce is getting recommendations from friends about what to buy. What we are doing is different—who you are buying from matters as much as what you are buying.”

Every listing is tied to a real Facebook identity, and the listings pages are redesigned to better show who that person is and how you are connected. Email communications similarly will display summarized profile information and pictures of common friends.

Oodle is facing increasing competition from younger startups such as Yardsellr to become the eBay of social, but with Facebook Marketplace Oodle has the scale to become the default for social classifieds.

How does Oodle plan to make money off of social classifieds where there are no listing fees? Off of businesses, of course. Oodle charges small businesses for premium services such as reporting and linking listings to their Facebook pages Whereas the Web and e-commerce has helped to “has really dehumanized local transactions,” Donato believes that social classifieds will help reverse that trend because they usually result in a face-to-face transaction where reputations matter more than on the web. He also believes that getting rid of anonymity helps to eliminate bad behavior such as scams or people simply not holding up their end of the bargain.

Now one of Facebook’s other hot venture capital investors, Accel Partners, has funded Yardsellr which claims it’ll be the “eBay of Facebook;” meanwhile Groupon’s runaway success has made everyone reevaluate social shopping. So what does all that mean for Oodle?

For one thing, the company isn’t slowing down. Last week, Oodle acquired Grouply.com to help people sell things beyond just their friend circles to the friend-of-friend circles. The deal underscores a core tension that has held online classifieds from becoming bigger faster: Do sellers and buyers want trust and relationship or do they want huge marketplaces of buyers and sellers? Because by definition, only buying and selling from people you know limits the market.

Donato joined us to talk about the market, the Grouply deal, why he says classifieds are “social but not viral,” and why he has stuck with building out a market this hard for this long.

In online classifieds, as with any marketplace, the more buyers and sellers a company can bring together, the more listings it can generate. Oodle is about to add 1.6 million groups to its social commerce platform. Oodle is acquiring Grouply in a deal which could be announced as soon as today.

Oodle powers social classifieds on Facebook and MySpace. Now, presumably, it will offer classifieds as an option on Grouply sites as well.

Grouply is a do-it-yourself social network built on top of Google Groups and Yahoo Groups. It takes those groups out of forum and mass email hell, and gives them their own sites. It competes with Ning, and in fact is trying to attract Ning refugees who don’t want to pay for that service. The deal might save the startup from having to compete with Ning.

The size of the deal is likely modest. Grouply raised a total of $2.6 million, most recently $1.3 million in January, 2008. Whereas Oodle has raised a total of $23 million. Investors in Grouply include Reid Hoffman, Jeff Clavier, and the Harvard Angel Group.

Online classifieds service Oodle is socializing its listings with a new interface that allows users to publish listings directly to their social streams on Facebook, MySpace and Twitter. Oodle already powers the classifieds listings for Facebook and MySpace. The startup announced the new feature last year, but is rolling it out today.

Users connect to their social identities via oAuth, Facebook Connect and MySpaceID directly from Oodle, allowing you to publish a status update or send out a Tweet with a listing. And people who are looking at Oodle listings will be able to Tweet or publish the posts out from the site. Oodle will also soon enable users to connect to their accounts on LinkedIn, eBay, Trulia and Zillow.

Oodle is wise to start tapping into users’ real time social streams and sales and transactions via Oodle are sure to increase with this implementation. Buyers may be more willing to purchase an item if it is sold through a social connection. This should help the site compete with one of the leaders in the online classifieds space, Craigslist. A year ago, Oodle raised $5.6 million in funding from Greylock Partners, JAFCO Ventures and Redpoint Ventures, bringing the total amount invested in the company to $21.6 million.

Even with a reasonable amount of overlap accounted for, these are significant numbers, albeit in countries where potential advertising income is generally much lower than it is in the U.S. and Europe.

OLX (a competitor to Craigslist in the United States) and hi5 (a competitor to the likes of Facebook and MySpace on a global level) claim the fresh partnership serves to consolidate both companies’ hold on the Latin American market, while making way for accelerated growth in the rest of the world.

As part of the agreement, hi5 will implement OLX features that include the ability to display ads on a user’s profile page and to see friends’ ads, as well as a feature to tell friends about their own ads via newsfeeds. OLX will also allow users to include videos and pictures in classified listings, comment, post/view listings in over 39 languages and 90 countries, and access the site from mobile devices. The latter two features are clearly meant to appeal to a large international user base.

Oodle, another major player in the online classifieds space, has been scoring similar deals recently with social networking services and portals like Facebook, MySpace and AOL.

The news comes right after a significant financing round announced earlier this month, when 3 VC firms invested $5.6 million in the company, bringing the total in funding raised to a healthy $21.6 million. Meanwhile, its traffic continues to surge (see Crunchbase profile for some upward-pointing visitor number graphs).

I would be very surprised if Oodle ends 2009 without being acquired for a price that puts a big smile on the faces of their investors.

For context, from the release:

AOL Classifieds is expected to serve as a platform for sellers to promote their listings by leveraging the reach of Oodle’s network of more than 250 partner sites.

Buyers can expect to find deals with access to more than 40 million listings aggregated from more than 80,000 different sites. In addition, AOL Classifieds links consumers directly to classifieds listings on other properties within the AOL network, including AOL Autos, AOL Jobs, AOL Personals, and AOL Real Estate.
AOL Classifieds is the latest addition to the AOL Local Network, which is an online local network with a monthly reach of 54 million unduplicated unique visitors.

In addition to the launch of AOL Classifieds in the U.S., a site for Canada is also available beginning today. An AOL Classifieds site for the UK will be launching later this week.

(Via Techmeme)

Its investors seem to agree, as they have just injected more capital in Oodle: Greylock Partners, JAFCO Ventures and Redpoint Ventures are adding another $5.6 million to the startup’s war chest, bringing the total amount invested in the company to $21.6 million.

Oodle is already powering the classified listings for MySpace, and the roll-out for the Facebook Platform is supposed to start this quarter, effectively replacing an in-house solution (Facebook Marketplace) in favor of a product developed by an outside company, as Facebook CEO Mark Zuckerberg explained in a recent interview with Michael Arrington.

As we speculated last month, Facebook is about to hand over its official classifieds listings to a partner, and that partner is Oodle, we have been able to confirm. An announcement may be made as early as tomorrow.

What is interesting about this deal is that Oodle already powers the classifieds on MySpace. Even though Facebook and MySpace are archrivals, this makes sense because in classifieds scale matters. The more listings and the more people seeing those listings, the better.

Classifieds so far have failed on Facebook because they have not been reengineered to be more social. Oodle should take a look at iList, which tries to make listings go viral by letting friends promote your listings for you.

By becoming the preferred classifieds partner, Oodle’s app would be promoted by Facebook in return for a cut of revenues generated by listing fees and the like. Facebook is also looking for a partner to run a preferred music service.

According to our sources, Facebook distributed a request-for-proposal to a number of classified sites earlier this year (the same model they are using for Facebook Music).

The obvious partner is Oodle, which began powering Walmart Classifieds earlier this year. We’ve heard thin reports that they in fact have won the contract.

Whoever powers Facebook Classifieds (or Facebook Marketplace, as they call it) has a big hill to climb. Competing with Ebay (and their Kijiji) and Craigslist isn’t trivial. The original thought was that social networks were great for classifieds because you the buyers and sellers know each other. But Facebook’s current classifieds system shows anemic listings. The Silicon Valley network, for example, had a total of ten new listings added yesterday. San Francisco had twenty. New York City – zero. And for those who’ve forgotten, Microsoft launched their own classifieds site based on MSN friends and private networks (like businesses), and it went nowhere.

Part of the problem is the limited functionality of the existing classifieds system, which allows a short listing, a picture and communication via Facebook’s messaging system. Better software may mean more listings (although the bare-bones and massive Craigslist is a clear exception to that rule). Oodle, or whoever wins the contract, may also bring lots of listings from their other networks.

If Facebook gets this right there is a potential for lucrative advertising dollars – people looking to buy stuff are easy targets.

Since the last time we gave an update at the beginning of the month there have been 20,171 layoffs at tech and media companies added to our Layoff Tracker. That brings the total to 58,709 tech layoffs over the past two and a half months. You can mouse over the iChart above to get a sampling of some of the companies that are downsizing.

One previously unreported layoff we have been able to confirm is 10 people at classifieds search engine Oodle, which occurred last week and represents a 20% reduction. Another layoff happened at Rearden Commerce, which trimmed about 40 people, or 10 percent (and Rearden just raised $100 million, showing that no company is immune).

The biggest layoff this month was announced just today by Sun Microsystems, which will be reducing its headcount by 5,000 to 6,000 (15 to 18 percent). Other big tech companies also announced cuts earlier this week, including Applied Materials (1,800 layoffs), Nokia Siemens Networks (750), and National Semiconductor (330).

The big tech and media companies account for the biggest number of layoffs, but when you look at the percentage of total employees being laid off, startups are cutting just as deep if not deeper. For instance earlier this month, Spot Runner cut about 30 percent of its staff (115 people), Dash Navigation eliminated 65 percent (55 people), and BitTorrent got rid of 50 percent (18 people). This past week we saw a 38 percent cut at Jobster (15 people) a 15 percent cut at Metacafe (11 people), a 10 percent cut at Current TV (40 people), and the complete shutdown of CBS Interactive’s Juke (5 people).

If you know of any layoffs at a tech company, please submit a tip with the name of the company and number of layoffs. If it’s been covered, also send a link to the blog post or news article. (For those more interested in who is hiring, check out our job board).

Microsoft Live Expo, their experiment with classified listings that launched in early 2006, will be shut down on July 31, says a notice posted on the site. New listings have already been suspended.

This comes as Craigslist solidifies its position as the top free listings service. Other services like Kijiji (owned by eBay) and Oodle (which recently partnered with Walmart) continue to grow. Recently Kijiji has made waves about their impressive growth rate. And other classified listing startups continue to get funded.

There’s just no room for Microsoft in the classified listings space, it seems. It joins the deadpool.

A screen shot of what it looked like in the good days is below.

The listings are free, which means Walmart is likely doing the deal to generate page views and advertising impressions. They also now compete with both Craigslist and eBay-owned Kijiji.

Walmart has a mixed history of success with Web businesses, but Walmart.com attracts 26 million visitors a month in the.U.S., according to comScore. Amazon attracts 47 million.

The classifieds listing’s went up quietly last week on Walmart’s site. The deal should help Oodle compeet against eBay’s Kijiji, which recently passed it in in the U.S., with 2 million unique visitors in April, versus 1.3 million for Oodle. Both trail way behind Craigslist, which has 30 million uniques, and is currently embroiled in a nasty lawsuit with eBay over Kijiji’s market entry into the U.S.

Oodle’s new interface offers better guided search across its nine categories (cars, real estate, rentals, jobs, pets, tickets, personals, services, and items for sale). This includes the ability to refine your search in a hunt-and-peck way by selecting multiple sub-categories at once (for instance, you can look for apartments in both Williamsburg and Tribeca, or for Toyotas and BMWs, all in one search).

Depending what category you are looking in there are also lots of helpful geographical sliders and other suggested ways to parse your search (by breed, for pets; by make, price, year or mileage for cars; by neighborhood, square feet, or amenities for real estate; by gender, sexual preference, marital status, smoking habits, hair color, and zodiac sign for personals). Oodle surfaces comparative pricing information in a handy graph for categories where it has enough data, such as cars. (The average price for a used Mini Cooper in New York City, for example, is $18,132 and the 2007 models show the steepest price declines). It also gives an inventory forecast—”We found 258 listings and expect 35 more next week”—based on historical patterns. Most search results can also be seen on a Google map. .

CEO Craig Donato wants to make searching for classifieds across the Web as easy as searching for any retail product or service. But classifieds are a strange beast. He describes some of the challenges people encounter when looking for something listed as a classified:

When it is gone, it is gone—because it is one of a kind. Listings are poorly described and spread across many different sites. Searching is time-consuming. You are not just searching, you are hunting. And good deals tend to go quickly.

His approach at Oodle is to make such searches easier by adding guided categories to help people refine their searches, e-mail alerts and inventory forecasts to help people keep track of listings over time, price comparison tools to help them make a buying decision, and sophisticated spam detection to help them avoid being cheated. The search engine adds more than 500,000 listings a day from 80,000 sources, such as Autobytel, Cars.com, Career Builder, Monster.com, Kijiji, locally-tagged eBay listings, real-estate broker sites, and local newspapers.

Conspicuously absent is Craigslist, which blocked Oodle from searching its listings a couple years ago. “We have a lot more listings than Craigslist,” claims Donato. “They have massive duplication. On Craigslist, you pay with your own time to list again and again.” On Oodle, you pay if you want your listing to stand out from the crowd. “What people are paying for is visibility,” says Donato.

Oodle is creating that visibility, he says, by attracting two million visitors a month. Between 25 to 30 percent of its traffic is coming from partner sites, such as TV-station sites that want to get into the local classifieds business, as well as some regional newspapers that add local listings from Oodle’s paid inventory to their own classifieds listings (and keep the lion’s share of any resulting click-though revenues). Donato say he is in the middle of rolling out about 200 of such partner deals, and expects Oodle to turn its first operating profit next year.

Besides Craigslist, Oodle faces stiff competition from other vertical search engines that focus on classifieds, such as Edgeio, Vast, and LiveDeal. Oodle raised $11 million last March from JAFCO Ventures, Greylock Partners, and Redpoint Ventures.

Disclosure: Michael Arrington is a founder and director of Oodle competitor Edgeio.

Oodle has expanded its listings through direct postings and a series of local listings partners, which it syndicates on sites like Yell.com, Local.com. include Engage.com, Local.com, ticket sellers, real estate brokers, colleges, and newspapers. However, Last year they lost their Craigslist feed. Edgeio and Vast are growing through slightly different ways. Edgeio has been partnering up with feeds from international sites, earning revenue by splitting listing fees (Edgeio marketplaces is a good example). Vast has been growing by crawling the deep web that lies behind login and search forms.

Oodle reports 20 million active listings from more than 75,000 sources in the US and the UK, when compared to Edgeio’s over 100 million international listings and Vast’s 25 million classified listings across 70,000 sites. Oodle, however, has some more advanced search features than these others, adding price tracking and maps where it makes sense. Their price tracking is a more basic version of what Mpire is offering in the shopping vertical.

Disclosure: Michael Arrington is a founder and director of Edgeio.

This seem to be primarily a combination of meetup events and tickets from a number of ticket brokers, including stubhub. There’s lots on money in this space from affiliate fees, so it’s a smart move.

Oodle clearly needs to find new ways to generate excitement. Traffic is flattish and they recently lost the feed from Craigslist, an important source of classified ads. Oodle is all about decentralized content, a theme I constantly talk about, and I’m in their corner. I hope they find a way to make their model work.