Craigslist, the One Thing You Won't Find For Sale on Craigslist.org
from May/June 2008
by Bonnie Azab Powell
|
In San Francisco’s foggy Sunset District, a few blocks from Golden Gate Park, a four-story Victorian house with aging cream-colored paint nestles between a pizza joint and a knickknack shop. If it weren’t for a plain black-and-white “craigslist.org” sign, you might think this was a rooming house for graduate students. The impression is only heightened once you’re buzzed in through the metal gate and pick your way gingerly around several large recycling receptacles to reach the front steps. In a spacious room one flight up, a man in jeans and a faded T-shirt pounds away at a keyboard. Manila folders are piled on tables lining the walls. Simpsons dolls, a George Bush figurine, and a stack of progressive political-action DVDs sit to his left, a stick of deodorant to his right.
“One sec,” he says, running a hand through a tangled mop of (mostly) black hair. Tap tap TAP. “Okay, sorry.” Swiveling around in his chair, he unfolds to his full 6-foot-8-inch height and reaches out to shake hands.
Meet Jim Buckmaster, 45, CEO of privately held Craigslist, the world’s No. 1 source of classified ads. Whether you’re shopping for a new job, a used car, a computer, an apartment to rent or a house to buy, Springsteen tickets, even a last-minute date (Craigslist’s “casual encounters” is an active category), you can find it among the 30 million ads placed by Craigslist users every month. Some 26.6 million American adults—that’s one in nine, and we do hope they’re adults because “casual encounters” can get pretty raunchy—visited the site in January, according to the digital-metrics gatherer ComScore. And although at 13 years old Craigslist is practically a senior citizen in Internet time, its audience is still growing at a sprightly rate: 2007 traffic was up 74% over 2006.
Shunning the common dot-com nomenclature in favor of the dot-org used by nonprofits reflects Craigslist’s evident goal of not maximizing its earnings. In fact, nobody outside the company has any real idea of its revenues, let alone its bottom line; even the founder claims blissful ignorance. Various technology and financial blogs have speculated that Craigslist rakes in as much as $150 million a year. At the other extreme, the classified-advertising consulting firm Classified Intelligence puts the company’s 2007 revenues at around $45 million. To get an idea of the kind of money Craigslist could be pulling in if it wanted to, consider how its publicly held competitors are doing. In the fourth quarter of 2007, eBay Inc. reported revenues of $1.5 billion from its Marketplaces business unit, which includes auctions, event tickets, and Kijiji (a very Craigslist-like classified-advertising site). Monster Worldwide, which owns the biggest job-search websites, including Monster.com, grossed $354 million in the fourth quarter of 2007.
The main reason for Craigslist’s comparatively small revenues is that it charges for only a fraction of its listings, and then at far lower prices than it could command. Every type of ad is free to place, except help-wanted listings in 10 of the 450 cities for which Craigslist operates mini-sites, plus apartment ads placed by brokers in New York City. A monthlong ad costs San Francisco employers $75, while employers in New York City and eight other major cities pay $25. In contrast, Monster.com charges a minimum of $395 for a basic two-month employment ad, or up to $1,000 or more for custom search services.
“Craigslist could be raking in $50 million a month, easily, if they wanted,” says Mark Potts, co-founder of WashingtonPost.com and now an independent strategic consultant for media and Internet companies. “But if they were charging more, they wouldn’t have the audience they do. Because Craig is essentially a socialist and a do-gooder, he lucked into something really successful that he probably never could have if he had tried to do it as a business.”
Craig is company founder Craig Newmark. In 1995 Newmark was a programmer for the Charles Schwab brokerage firm who sent out a weekly e-mail list of various hipster events around San Francisco. He was surprised by how popular the list quickly became, and as the Bay Area dot-com bubble grew, people began asking him to include job and housing ads too. In 1997 he built a rudimentary self-service website that allowed anyone to post listings, and ran it out of his apartment.
Traffic was significant enough to catch the eye of Microsoft, which asked to buy ads on the site for its Sidewalk city-guide series. Newmark said no, and continued to say no to other would-be advertisers, as well as to the venture capitalists who began to circle like flies around honey. In 1999, when bandwidth fees and the cost of Web hosting were pinching his bottom line, he quit Schwab, incorporated the company, and went on Craigslist’s active and opinionated forums to ask users how they thought the site could pay for itself. The eventual consensus: Charge San Francisco’s rich dot-com employers for their job ads. Craigslist has been in the black ever since, the company claims.
Newmark hired Buckmaster that same year to help with some Web programming—he found him via an ad on Craigslist, of course—and the next year named him CEO. Newmark, now 55, these days proudly calls himself “a customer-service rep.” He works out of the same office as Buckmaster in the old Victorian house, or from nearby cafés and home, answering thousands of user e-mails, solving disputes, rooting out spammers, and assisting law enforcement in chasing down potential child molesters and the like who use Craigslist to find victims. Buckmaster had never run a company before, although he says he’d had managerial experience. His most important qualification seems to be a shared sense of “nerd values,” as Newmark calls them. “Once you make enough to live comfortably and provide for your future, it’s more satisfying to change the world than to make more money,” Newmark told Corporate Board Member in an e-mail. “I don’t feel there’s really anything noble or altruistic about what we’re doing at Craigslist. Pretty much all of us grow up with values like ‘Treat others like you want to be treated’ and maybe ‘Give the other guy a break.’” The only thing that makes Craigslist different, he says, is that it follows through on those values.
Well, there are some other differences. Despite the geographic reach of the operation and the number of ad categories Craigslist carries, Buckmaster has no secretary to make appointments, no CFO, and no chief operating officer either. “There are some luxury hires, like an in-house counsel or a COO, that might be nice, but we manage very well with several of us wearing many hats,” he says. “In my experience, the larger the company, the more dysfunctional it is. We want to stay small.”
When Buckmaster says small, he means tiny. Counting Newmark and himself, there are only 25 employees, all crammed together in the old Victorian. “You need far fewer staff when you’re not trying to maximize revenue. We prefer to think of Craigslist as a grassroots community service,” Buckmaster explains. “Our mission is about giving people a break, helping them find what they need. We get so many e-mails from people who’ve basically found their whole lives on Craigslist.”
Can anybody be this pure? They certainly have legions of fans who visit, use, and love the site, especially its no-frills design, a time capsule of the Web circa 1999. Says Colby Atwood, president of Borrell Associates, an advertising research and consulting firm: “I think Craig is the genuine article. He really believes in what he’s doing. If he were greedy, we’d know it by now.”
A small but noisy handful claim they have discerned greed and cite an odd transaction in Craigslist’s history as evidence. In the ’90s, Newmark gave early employee Phillip Knowlton 25% of the company. Newmark later described Knowlton as a customer-service trainee. When Buckmaster became CEO, he got a piece of the company too—possibly more than Knowlton, since Newmark told TV interviewer Charlie Rose last year that he owns less than half of Craigslist. According to a July 2007 posting on the technology-gossip blog Valleywag by its managing editor, Owen Thomas, Newmark and Buckmaster later tried to squeeze Knowlton out of the company “by issuing new shares to dilute his ownership stake.” Knowlton shopped his shares around, approaching Google and Yahoo, among others, before selling his stake to eBay in 2004, the same year he left Craigslist.
The big question is, how much did eBay pay for it? Industry gossip puts the total at around $16 million, all to Knowlton. But Thomas claims eBay forked over another $16 million to Craigslist, which Buckmaster and Newmark split. “Like the rest of Silicon Valley, they’re all about the money. Unlike the rest of you, they’re just better at hiding it,” he wrote on Valleywag. Knowlton, Newmark, and Buckmaster decline to discuss the matter, and eBay did not respond to requests for comment.
If Thomas is right, then Craigslist’s two head honchos are pretty darn good actors, and abstemious ones at that. Buckmaster has never owned a house or car; he takes public transportation to work. Newmark owns a modest house in San Francisco’s not-so-fashionable Cole Valley neighborhood. He has a Prius but doesn’t drive it; he leaves that to his friends. He prefers to take the train and get off five blocks from his destination to press on toward his goal of walking 10,000 steps per day. He has made many $50,000-and-under personal investments in new-media start-ups and political-engagement sites. He serves on the boards of various nonprofits, including Consumers Union and the Sunlight Foundation, which tries to bring more transparency to what elected officials are up to. Craigslist also has its own nonprofit foundation, whose aim is to provide training and services to other nonprofits. The company has traditionally donated at least 1% of its earnings to employee-selected charities, Buckmaster says, and in December it gave $1.6 million, its biggest-ever gift, to endow a chair at the University of California at Berkeley’s Center for New Media. Buckmaster will join the center’s executive advisory board, his only directorship.
The biggest threat to Craigslist’s continued success comes from its minority stakeholder, eBay. Back in 2004, Buckmaster and Newmark put a positive spin on the deal, saying among other things that they hoped to leverage the auction giant’s experience to help them combat spammers and branch out into international markets. However, eBay made no secret of its slightly more competitive plans, writing in its annual report that year that with “our equity investment in craigslist.org, we took important first steps into classifieds, which set the stage for the launch of our own local websites in select international markets, under the brand name Kijiji.” Started in 2005, Kijiji—Swahili for “village”—serves 11 countries in their own languages. Craigslist, with only Spanish as a second language, has been clobbered overseas; in December it attracted just 400,000 visitors, compared with Kijiji’s nine million, in the nine foreign markets that Nielsen Online measures.
Last June eBay launched Kijiji in the U.S. As part of its growth plan, it is hoping to attract users—and sitewide advertisers—among the wholesome folk who are horrified when they accidentally venture past all the “18 and over only” and “possible offensive content” warnings on Craigslist and into the “graphic adult” postings. On the other hand, other visitors may be just as revolted by the pet ads that Kijiji carries, a category Craigslist dropped under pressure from animal activists fearful that they would encourage puppy mills and the like.
In the U.S., Craigslist clearly still dominates the field—Kijiji got fewer than two million visitors in December, a tenth as many as visited Craigslist sites. However, “if Kijiji can monetize its overseas success, it could be a long-term threat to Craigslist,” says Colby Atwood, whose Borrell Associates has studied both companies. “People do appreciate a larger feature set, and Kijiji has a few bells and whistles Craigslist doesn’t. I’m sure that Craigslist is keeping an eye on these folks.” Responds Buckmaster in his typical discursive way: “We really just think about our users and what they want, not competitors. But given that it’s clearly patterned after what we’re doing and offers some of the same services, it sets up some interesting questions, coming from a minority shareholder. We’ll just see how it plays out.”
Would Craigslist ever consider placing an ad for itself—“Dot-org Company Seeks Public Investors,” perhaps—as a way to raise a few million to challenge Kijiji’s foreign-language sites? “We’ve never seen any advantage to our users in us going public, so no,” Buckmaster says. ”We’d just feel very silly, given what we’re trying to accomplish and what the site is about, managing earnings expectations, for instance.”
Then the solemn programmer-turned-CEO adds, with what almost looks like a smile, “But, you know, time keeps rolling on, and as a for-profit company with a few shareholders, we can’t entirely predict what the disposition of those shares will be over time. If you get out far enough, and Craig and I are both dead, I guess you can’t rule out anything.”
For now, though, the message is “No help wanted.”
