By Corey Kossack

Last week, Y Combinator debuted one of its new startups, Listia, which the site is describing as "auctions for free stuff". The basic concept is that users list items they no longer need or want, and other users bid on those items with points earned through the site by registering, referring friends, listing items or purchasing additional points through the site. For more information on how the site works, see Michael Arrington's [Techcrunch Review]. 

Listia is a novel concept and has a real shot and gaining traction for a few reasons in my opinion:

1) They have a solid niche: Sure, there are places online where you can find and give away free stuff, but there aren't any recognizable brands in the space that do exactly what Listia does. The site does not try to compete directly with eBay or Craigslist, but rather focuses solely on making it easy for users to find free goodies. Listia should appeal to individuals looking for stuff they can pick up for nothing (or next to nothing), rather than targeting the small retailers who have made their home on eBay and eBay's slew of competitors that have popped up over the last number of years.

2) It's fun: One of the factors that made eBay such a huge success in its early days was how engaging and fun it was. I remember when I first started using eBay almost a decade ago, I used to love checking to see if anyone outbid me on that pair of front row concert tickets, and wanted to sneak my last second bid in to beat them out. eBay was like a game for that reason, and similarly for sellers, who beyond wanting to grow their business, seemed to get caught up in wanting to sell more stuff so they could reach "Platinum PowerSeller" status. Listia uses these types of concepts to their advantage by creating a fun experience where users will spend a good amount of time on the site to find ways to get more points and get the items they want.

3) It has built-in viral marketing and positive appeal: The site rewards users for bringing new users to the site and for listing new items. Unlike other reward programs that focus on direct financial incentives, Listia rewards its users for helping to grow the site through the use of its own special currency, points. For most people who won't want to pay for that extra 500 points they need to grab the free iPhone they want, they can earn those points by engaging in activities that help the site flourish. Referring a friend that ends up listing an item gets you 50 points, and listing an item on the site gets you a hand full of points as well. In addition, they have created a charity component to the site, which will help them spread the site to those charity networks as well.

Perhaps one of the biggest hurdles for Listia will be getting high-quality products listed on the site (since people are "giving away" their stuff). The site shouldn't have a terrible time getting low-ticket items to show up on the site, but higher-priced items may be few and far between. However, Listia has begun something they call "Rewards Auctions", which are bigger ticket items that are put on the site by Listia itself. This is a great idea in itself and could keep users coming back to the site to see if they can get their hands on stuff like a new plasma TV for nothing.

Looks like an interesting company to keep an eye on.