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Say you’re an entrepreneur bent on creating a classified ad site. How do you compete with the free ads you find on Craigslist? For US-based auto-classified provider HotSwap, the answer is to give users a more feature-filled platform for displaying their ads in a friendly, community-like atmosphere. And still charge nothing. Specifically, HotSwap gives users a way to post video ads of their cars online, YouTube-style. Anyone can shoot a video of their car with a cell phone cam or other digital camera and upload it to the site, along with still images and a description of the car. HotSwap also throws in some useful search tools for prospective buyers. Shoppers can search for cars by their mileage and colour, for example, or post questions about the vehicle for all to view and negotiate an offer online. Still, it’s the videos which give the site its sizzle. Underlying DivX encoding can improve low-res video uploads to high quality moving images. HotSwap’s founders, who met as graduate students at the University of California, are making the site pay by providing their video services to large-scale car dealers, including AutoNation. The site has already attracted some heavy-hitting investors, including Apple Computer co-founder Steve Wozniak and the co-founder of Clear Channel Communications, Red McCombs. Deep pockets and a slick video codec notwithstanding, what really separates HotSwap from the crowd of online-classified purveyors is the friendly feel of the site: more visually appealing than Craigslist, and not as commercial as cars.com. HotSwap’s organizers even advise sellers not to edit their videos into slick presentations, saying the home-produced uploads give viewers a more believable impression of a vehicle being sold. Believability isn’t a word often associated with used car sales, and it could end up being the biggest factor in HowSwap’s success. And something for anyone in online sales to learn from. (Related: Craigslist meets YouTube.) Spotted by: Bill McMahon