Craigslist is one company that requires no introduction. The platform has become such a ubiquitous part of the internet culture that we tend to forget that it was founded nearly 30 years ago, in the early days of what we might consider the modern internet. However, despite its popularity, many people do not understand how the Craigslist Business Model works. This article seeks to clarify this, explain how the company generates revenue, as well as point out the strengths, weaknesses, and opportunities of the Craigslist platform.
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Craigslist is a popular online classified ads service that allows users to advertise things like job opportunities, housing, services, items, and so on. The platform is headquartered in San Francisco, California, and employs about 50 employees. With an estimated market valuation of $2-3 billion, Craigslist is the leading figure in the world of online listings and advertisements. However, its success tends to make people forget its humble beginnings.
Craigslist started as the pet project of the founder and current majority shareholder, Craig Newmark. Working as a software engineer in the Bay Area, Newmark initially started the service as an email distribution list in 1995. His goal was to help his friends, as well as other tech industry members in the area, connect by advertising local events.
However, he noticed the rapidly growing popularity of the platform, as well as how certain members have taken advantage of its large reach and ease of use to advertise additional content, such as job listings. This led to the subsequent creation of new subsections within the service as well as the launching of the Craigslist website (craigslist.org) in 1996, widening the scope of the original email distribution list to a sort of electronic newsletter.
After a brief change of name, the platform was officially incorporated as a private for-profit company in 1999. At this time, Newmark decided to quit his job as a software engineer and focus solely on building the company. He was joined in early 2000 by current CEO Jim Buckmaster, who helped pioneer some of the most revolutionary improvements made in the platform. The platform continued to operate within the San Francisco area until 2000, when it decided to expand its services to other states within the U.S.
Initially, the services offered by Craigslist were basically free. However, in 2000 it began monetizing its job listing section in Boston, before moving on to New York and Los Angeles in 2004 by charging potential employers $25 per job listing. In that same year, the platform made headlines when the online e-commerce company eBay became a board of directors member when it invested $32 million to purchase a 28% stake in the company. This, however, led to over a decade of legal battles and disagreements on several key features of the platform, such as monetization of many of the services which the platform offered for free, as well as accusations of intellectual property theft.
Despite these challenges, the company continued to grow. In the years following this, the platform grew to provide services to over 570 cities in 70 countries all around the world. Its websites are now available in over 14 languages, including English, French, German, Dutch, Spanish, Italian, Portuguese, and so on. Eventually, the site bought back its 28% stake from eBay in 2015, ending the conflict and allowing them to focus on its core values instead of profit.
The official site is one of the most visited websites in the world, ranking 26th in the US and 92nd worldwide. The platform boasts over 80 million new ads every month, which collectively pull in an estimated 20-50 billion views per month from over 250 million visits. This has translated to a healthy growth rate and a more than modest revenue of $660 million in 2021, making it one of the most profitable companies in the world.
However, according to the CEO of the company as well as several other trusted sources, the primary aim of the Craigslist platform is not solely to generate profit. This probably explains why most business analysts believe that the platform is underperforming and could be raking in significantly more profit than it currently does.
Craigslist is a private for-profit business and is therefore owned by whoever controls the majority of its shares. Currently, the founder Craig Newmark owns the highest amount of stocks in the company (estimated to be about 42% in 2017), while Jim Buckmaster also controls a significant amount of stocks as well.
According to their official website, the company’s mission is about:
Despite its widespread success and longevity in the industry, Craigslist has changed a little from the original business model developed by Buckmaster and Newmark back in the early 2000s. The company operates using a basic peer-to-peer (P2P), agency-to-peer (A2P), or agency-to-agency (A2A) model.
Essentially at its very core, Craigslist is an advertising service that allows users to post ads for a diverse array of items and services, including house listings, online retail, job vacancies, gigs, and even personals. Users are then required to pay a fee, which may range anywhere from $0-75, depending on the particular type of listing, as well as other factors.
The platform then connects both parties by allowing them to communicate and reach an agreement on the terms of the exchange. The site does little to interfere with or facilitate this process, acting merely as a conduit for negotiation, and will only intervene if a complaint is laid by any of the parties involved. The platform also offers a chat forum where users can freely discuss a wide range of topics and issues. This helps create engagement and drives traffic to the platform as well.
One distinct feature of the platform is its staff’s relatively scarce amount of moderation. Right from the beginning, the company has encouraged platform members to act as self-moderators and flag any harmful or offensive content, which will then be promptly removed from the site.
Another interesting feature of the platform is that its services are mainly concentrated around urban areas (or, in some cases, metropolitan areas). Not only does this form of location-based advertising make it easier for those living in or around these regions to navigate the site and connect, but it also helps the company streamline its services since most of the traffic to the platform is concentrated in urban areas.
Let’s further explore how the Craigslist platform generates revenue.
While it’s no secret that Craigslist’s management tries to keep the company as nonprofit and free as possible, certain services on the platform are monetized. For certain listings, platform members are expected to pay an advertising fee which varies depending on the product or service being advertised, as well as its location.
Some of the various fees include:
While this does not form a major part of its revenue, Craigslist did initially receive a round of funding in 2004 where the company received $13.5 million from eBay. This figure is surprisingly low compared to the investments other comparative tech giants received, as well as the company’s sheer size today.
The answer to this question is yes, the company is quite profitable. Craigslist has grown rapidly since its incorporation as a for-profit company in 1999. In 2021, it posted an annual revenue of $660 million, representing a 17% increase from its income in the previous year. However, there is still significant room for growth, as many business analysts project that many of the services on the platform have not been monetized to their full potential.
Let’s explore the Craigslist business model canvas to understand the core prim behind how the company operates.
Craigslist’s customer segments consist of:
Craigslist’s value propositions consist of:
Craigslist’s channels consist of:
Craigslist’s customer relationships consist of:
Craigslist’s revenue streams consist of:
Craigslist’s key resources consist of:
Craigslist’s key activities consist of:
Craigslist’s key partners consist of:
Craigslist’s cost structure consists of:
Let’s take a look at some of the top competitors of the Craigslist platform.
The platform offers a much more interactive experience than Craigslist, allowing users to take 3-D virtual tours of the properties, as well as access vital information such as the number of schools, hospitals, and recreational centers in the area. They also offer users basic information on trends within the housing market.
They provide a 360-degree view of the vehicle, as well as various technical stats like the make and model, fuel efficiency, price, and other important features. They also support various forms of payment, such as outright cash payments, and loan financing, which can be done through the platform or a third-party lender and trade-ins. The company delivers these vehicles right to your doorstep after making a purchase.
Now that we have a more well-rounded understanding of the platform, let’s take a look at a detailed swot analysis of Craigslist business model.
As things stand currently, Craigslist looks poised to continue its dominance over the classified ads market. Its first-mover advantage, loyal followers, easy user interface, and versatility give it an advantage over its competition. However, with the rise of ever-increasingly sophisticated advertising services, the platform could see itself fall from this pedestal if significant improvements are not added to its current business model.
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