from Online Journalism Review, June 3, 2004
'Nerd Values' Help Propel Tiny Craigslist Into Classifieds Threat
by Mark Glaser
Craig Newmark started the community site as a hobby, but it soon became a San Francisco area institution for selling cars, getting jobs and finding sex. But just how much has it eaten into newspapers' traditional classifieds business, and can they win that back?
In San Francisco's bustling Inner Sunset neighborhood, you might find a coffee shop, a restaurant, a pharmacy or the offices of Craigslist.org. It's no wonder that the infamous community site is nestled in so well with the shops and hubbub along Ninth Avenue, because it has learned how to fit in and help the community more than any other media Web site in San Francisco.
Started nearly 10 years ago by soft-spoken software engineer Craig Newmark, Craigslist went from a small e-mail list of local events and parties to become a national and international phenomenon providing local residents with a cheap, simple way to sell junk, find a new job, or find a mate quickly. And as it has grown to encompass 45 cities -- with more to come -- Craigslist has resisted buyout offers and paid advertising while becoming a powerful alternative to daily newspaper and alternative-weekly classifieds -- especially in its hometown.
I stopped by the funky whitewashed basement and Victorian flat offices of Craigslist recently, and chatted with Newmark, whose eyes flitted to his computer screen from time to time to monitor activity and complaints that come streaming into his inbox. Though the staff has grown to 14, including a recent customer service manager, Newmark still spends 40 hours per week helping to deal with scams, community problems and other customer service details.
"I'm an engineer basically, my background is software engineering," Newmark said. "Our mindset is if we see something that needs to be done, we just do it. That's really it right there. People have said, 'How do you feel being a baby sitter?' and sometimes I have to fulfill that role."
The only income the site gets is from for-profit companies that run job listings in the San Francisco Bay Area, though Newmark said he is considering charging for similar job listings in New York City and Los Angeles. Though many people assume that the site is a nonprofit because of the dot-org in its name, it is a private, for-profit site that does not share its financial information with the public.
Craigslist CEO Jim Buckmaster told me via e-mail why they set it up as a corporation instead of nonprofit. "Since we have never solicited or accepted charitable donations, and since our primary activity does not qualify for tax-exempt status, it doesn't make a lot of sense for Craigslist to operate as a nonprofit. Also, nonprofit vs. 'for profit' status has nothing whatsoever to do with whether an organization is profitable."
Newmark considers Craigslist to be a "noncommercial" site, and says he has rejected many buyout or investment offers from venture capitalists and others. Plus, in 1997 Microsoft Sidewalk approached him about putting banner ads on the site -- something that would have supported the entire enterprise. But Newmark kept the site independent and has supported local charities or put money back into the site, he says.
Newmark's goal is just to live comfortably and not become a dot-com multimillionaire, which he may well have become if he had taken up one of those offers. Newmark calls his philosophy "nerd values," which he explains as making "enough for a comfortable living, at which point you do something fun like changing the world." Newmark laughs at the notion of being a celebrity or mayor of the virtual town (see more quotes from him below).
Howard Rheingold, futurist and author of "The Virtual Community" and "Smart Mobs," says that Craigslist is a great example of a dot-com that succeeded because it didn't take venture capital. "They grew organically," he said. "The fact that Craig is the real thing and is part of the culture. It started as an e-mail list. It wasn't some big company suddenly sponsors this service, it was word of mouth. It's the people themselves that populate it. Why should it change? As far as I'm concerned, it works."
Rheingold also noted that the site has revolutionized sex, both amateur and professional services, with its Casual Encounters and Erotic Services sections. Both offer simple ways to find discreet or indiscreet sexual rendezvous.
"Man, that's a big deal, I think," Rheingold said. "People in their 20s I know who have tried it have indicated to me that there's a whole culture around it. This isn't what drove Craigslist. What really drove Craigslist was finding a place to sell your couch. But it's certainly become a part of it."
The edgy, free-for-all nature of ads placed on Craigslist has led to a documentary movie called "24 Hours on Craigslist," which follows the trail of various people who have posted on the San Francisco site. Plus, the "Best of Craigslist" section includes a quirky collection of community rants, from "The Truth About Blind Dates" to "The Further Adventures of Scrooge the Cat." (Yes, it's a guilty pleasure of mine.)
How big a threat?
There's something so simple and pure about writing up a quick ad when you want free stuff for your young baby -- and then getting it. Or searching through ads for apartments or cars or whatever. But both Newmark and some newspaper chains downplay just how much of an effect Craigslist is having on their traditional classifieds business.
Newmark told me that many of the ads on Craigslist wouldn't be placed in newspapers at all, and come from a hipper online audience. Liddy Manson, vice president and general manager of jobs, cars and real estate for Washingtonpost.com, says that sites like Craigslist and eBay focus on consumer-to-consumer transactions, while the Post's bread and butter is business-to-consumer ads from car dealers, real estate brokers and recruiters.
"As far as I can tell, Craigslist has really taken over the classifieds business in San Francisco, and it's not there in (Washington) D.C.," Manson told me in a phone interview. "That doesn't mean it's not going to mature and grow and become more than it is today. It's only been in D.C. for 14 months. There's no doubt that Craigslist is making us think about our business differently, and making us think about what the hot buttons are for this community -- both in terms of what people are buying and selling, but also in terms of what makes a community come together around certain types of activities."
Manson thinks that the Post has a good head start on Craigslist in job ads, with somewhere between 16,000 and 21,000 ads on its site vs. Craigslist in D.C. having about 2,000 ads. The edge for the Post is with its detailed searches and strong presence in the market, according to Manson, though she admits that there are certain part-time and nanny jobs that work better on Craigslist.
"If you put a listing for a nanny on The Washington Post, you might not be prepared to get 200 calls in a week," she said. "The response can be overwhelming. There are certain types of recruiting where Craigslist or a much smaller community newspaper is an effective alternative."
Peter Krasilovsky, vice president and senior partner at Borrell Associates, helped write a white paper on online recruiting ads, and guesstimated that Craigslist brought in $6.7 million last year in job ads in the San Francisco Bay Area. That's a hefty chunk of the $40.7 million in all online revenues that Borrell estimates came in for the three big classified areas of real estate, automotive and jobs in San Francisco.
Buckmaster disputed the $6.7 million figure, saying that the estimate probably didn't take into account volume discounting, free nonprofit postings or collection failures. But he also said that overall Craigslist postings (other than forums) have hit 2.5 million per month, up 100 percent over last year, while the site has reached 5 million unique users per month.
Krasilovsky says that some newspaper execs have reason to worry about Craigslist, while others are using it as an excuse. "The Bay Area papers, especially the San Francisco Chronicle and San Jose Mercury News, probably feel like they've had their lunch money taken away by Craigslist," he told me via e-mail. "Given the recently depressed job market, there have been a lot of questions in the newspaper industry (as to) why they are not getting the recruitment dollars. Craigslist is a real convenient excuse, but is obviously just a part of the problem."
Though Krasilovsky makes a living giving business advice to newspaper sites, he still has a lot of admiration for the simplicity of Craigslist. "One thing about Craigslist -- it is real thin," he said. "That makes it easy and fun to read, easy to maintain. While newspapers have been adding feature after feature to keep up with (job site) Monster.com's own feature creep, there is Craig with these little text postings, and they do the trick. As a consultant, we are always advising newspapers to add features and diversify their classified revenue beyond listings. But Craigslist suggests maybe that isn't always the right answer."
The Tribe.net alternative
Another answer might be for newspapers to take a more experimental tack via social networking sites, where a visitor might buy something because it's sold by someone they know through someone else. That was the thinking when The Washington Post Co. and Knight Ridder invested money as part of a $6.3 million round of venture capital in startup Tribe.net, which has started to include Craigslist-like listings on its site.
Ross Settles, vice president of new business for Knight Ridder Digital, told me that he sees Craigslist as aggregating a lot of nontraditional listings that are usually under the radar. "It's a different quality of listing, but it's very targeted in nature," he said. "Their users are younger. Those listings are important and attractive to us because they tell us how the market is going, about activity that we haven't penetrated yet."
Settles said that everything was still on the table as far as future steps with Tribe.net, whether that might mean cross-promotion or cross-listing. He says that the Tribe.net investment was basically a way for Knight Ridder to look at "doing some of the same stuff that Craigslist is doing. We're pretty excited about it, but how do we capitalize and leverage that for our market? We should have some answers in the not too distant future."
So far, though, the social networking arena has been long on hype and short on revenues. Plus, the one thing that makes Craigslist so appealing is its noncommercial nature. "Last I looked, none of these (social networking) sites were making money," Newmark said. "Clearly there's a paradox there. Let's say you're a site about people connecting. If you're very obviously there to make some people a lot of money, that might send the opposite message."
But Newmark does want to bring in extra money to stave off a frivolous lawsuit. While he does want to expand Craigslist internationally -- and has considered more features for the site -- he understands that those moves would require translators or more customer service.
New media consultant Barry Parr, who pens the MediaSavvy Weblog, is an unabashed fan of Craigslist, having bought and sold thousands of dollars of goods there. He thinks newspapers have an opportunity to get back some of their lost classifieds business online, but it would mean destroying their print classifieds in the process.
"God, I love (Craigslist's) simple interface and the way their software works," Parr told me via e-mail. "Everyone I've met through Craigslist has been someone I liked doing business with. It's so freaking wonderful. Newspapers' Web sites are unspeakably awful by comparison. They have too many masters to serve and virtually all of them don't understand how to make a Web site work."
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Craig Newmark Quotables
On his personal finances:
"I spent roughly three or four years doing software contracting, which was, in that period, very lucrative. It was '95 to '99. I live relatively simply. I kept my last car 10 years. Despite the occasional gadget, I was saving a lot. Fortunately, I didn't invest a lot (before the crash)."
On his constant vigilance against spammers and scammers:
"We need to do a better job dealing with offshore scammers because the Feds don't have the resources right now because they have bigger priorities. I've had these discussions with cops on all levels and we do take care of a lot of petty crap without involving them. Usually I can reason with someone and almost always that works. There are times when it doesn't."
On his favorite newscaster:
"Jon Stewart (on "The Daily Show") is my favorite source of news now. Only in fake news can you find truth ... Right now Kerry's best advisor is Jon Stewart. Stewart is making fun of Kerry's speaking style and Kerry needs to hear that because 30 years ago he was a good speaker, but he's been too long in the Beltway as a senator."
On journalism and his news consumption:
"Journalism is at the beginning of great changes through blogs and camera phones, especially when you can get live video camera phones. And advertising is changing -- not only classifieds but everything else. They have to learn fast to adapt to those. We're having an effect, but probably not that big of a deal. Google ads are probably a much bigger deal."
On his "open source" way of doing classifieds:
"Let's say the philosophy is the same (as open source). Doing things because they feel right and you know you've got to make a living, but you don't have to go overboard."
On being viewed as the community leader or virtual mayor:
"Maybe so, but I'm not going to believe my own press. That would be bad."