from The Wall Street Journal Online, May 13, 2002
Tech Q&A - Craigslist Begins to Make a Dent In New York Apartment Market
By Jennifer Saranow
Finding a Manhattan apartment hasn't been the same since Sept. 11. The weak economy and fears about safety have sent rents on the island and other, close-in areas down as much as 20%. Landlords have offered such incentives as free months of rent and subsidized broker fees to attract tenants.
But the rental market has changed in other ways as well. The quick spike in apartment openings made cutting out the traditional broker -- who in Manhattan acts as gatekeeper to most apartments and gets as much as 15% of a year's rent -- a possibility. Increasingly, landlords and potential tenants are connecting directly online, often through sites like listings-hub craigslist (www.craigslist.org).
At the two-year-old New York section of the site, word of mouth has sharply boosted postings and traffic since last fall. Current apartment postings on the New York site grew to about 5,900 in March from about 640 in September, while monthly page views for the same period grew to more than 700,000 from 175,000, according to craigslist.
Among no-fee listings, postings rose more than tenfold to 2,300 in March from 180 in September. Brokers/agent postings rose to about 3,700 from 440 in the same period. The New York Times Web site, by comparison, boasted about 3,000 no-fee ads out of about 20,000 overall in Manhattan and Brooklyn on a recent day.
Started in 1995 by engineer Craig Newmark, craigslist aimed to be a place where people in the San Francisco Bay Area could find "everyday stuff" and tell each other about "cool events" through simple e-mail postings. Mr. Newmark, the company's chairman, wrote the posting software himself and gradually set up craigslist sites for other cities -- from Seattle to Sydney to New York. On the home pages, Web surfers can read and post personal, housing and job ads or just chat in a variety of discussion forums.
According to tracker Jupiter Media Metrix, craigslist sites (including all cities) drew more than 500,000 unique users a month so far this year. Craigslist doesn't disclose revenue or profitability. "For sure, we're not going to get rich," says Mr. Newmark.
The Wall Street Journal Online asked Mr. Newmark, 49 years old, about his operation and whether sites like craigslist could do for New York apartment seekers what Travelocity and others did for travel.
The Wall Street Journal Online: How is your site affecting the New York property market?
Mr. Newmark: I have the impression from what we've heard that a lot of people are successfully finding no-fee apartments through our no-fee section and it really is helping people out. It's making it easier for a lot of people to find a place, and possibly providing a little downward price pressure.
What we hear is all indirect and anecdotal, but we've heard there are more listings on our site and fewer in places like newspapers. For example, on our site a person can write as much of a description for their place as they want. You can't do that in print. Also, if you fill your vacancy you can take the listings out immediately, which you can't do in print.
Q: What does your site mean for brokers?
A: Right now sites like ours, which basically make more information available to more people, will make things better for really good brokers and will make life harder for brokers who aren't capable. And that's true not just in rentals. Brokers love our site, and use it heavily -- they fill their vacancies painlessly and cheaply. The message we're hearing is that brokers still play a vital role in New York, and it's okay if they list on our site as long as it's easy to identify them. That's why we have separate apartments categories.
Q: What is your business plan?
A: Craigslist is a place where people can find everyday stuff, like a place to live, a job, maybe even a date. To cover costs, technology and customer service, we charge businesses a small fee for job listings in San Francisco. [In New York, craigslist doesn't charge fees or run advertising.] Employers, recruiters and landlords have budgets for getting the word out, and we help them do that in a very cost-effective manner in the Bay Area -- we're saving them a lot of money, while covering our costs.
Probably the most unusual aspect of our business plan is that we're not trying to get rich. I grew up wearing a plastic pocket protector ... which is to say I was an exemplary nerd. The major social dysfunction of my people, the nerds, is that we think life should be fair, and can't understand why it's not. Craigslist is my way of making life a little less unfair.
Q: What sort of accountability is there for real-estate postings on your site?
A: Folks generally alert us to listings that seem hinky, and we deal with them quickly. We're working on ways to make this happen even faster. If a listing is too vague, if it's too good to be true, then we hear about it.
Q: How did Sept. 11 affect the housing market? How did it affect the popularity or traffic on your New York housing site?
A: The number of classified listings we receive in New York, especially for housing available, started to go exponential immediately after 9/11. The traffic on the New York site, which has been growing extremely rapidly since early 2001, accelerated significantly toward the end of 2001 and beginning of 2002.
Q: How about the weak economy?
A: One effect that you're probably very aware of is that the percentage of brokers/agents charging apartment-seekers a fee in general has dropped dramatically over the last year, and especially since 9/11. The Net makes it much easier for anyone to find tenants, and that reduces the need for brokers. Craigslist housing activity surged in September, possibly because people saw our response to 9/11 needs, and because people see that we're committed and effective.
Q: Is this because there are now more apartments available, and thus more supply relative to demand? Or because of competition from the Internet?
A: From our housing-discussion board, we hear that there is indeed a lot more housing available, and that prices are dropping. The Internet has accentuated this trend, since people are less reliant on brokers or less flexible media.
Q: What neighborhoods in New York are seeing the most postings?
A: Just by eyeballing the listings, it looks like neighborhoods like the Village and Williamsburg have more. The correlation has to do with people who are more Net-savvy, and also has to do with the correlation of whom brokers perceive as Net-savvy.
Q: Do you think the popularity of your site in New York could alter your business plan?
A: Let's say it may in the future. Let's suppose we provide a better apartment-finding site than any other. Right now, we have no plan to charge in New York City. But everything can change in the future, though we would have to be morally justified in doing so. Last year in San Francisco, when we were considering charging for different things, we actually asked our community what would be OK to charge for and there was a lot of discussion, debate and not much consensus, but that's the way we work and proceed. We are buying more servers and bandwidth for our New York site and will be adding more free services for New York now that so many people are using it.
Q: How do you see the housing section of your site changing?
A: We need to make it a lot easier for people to search for apartments: by number of bedrooms, by neighborhood.
Q: How do you envision the craigslist empire in 10 years?
A: Craigslist has become bigger than I ever thought it would be. But the vision has always been the same. From my point of view, I'm providing a platform that gives people a break. It helps them with everyday stuff like finding a job or getting some place to live. On the Web, it's easy to find a place that gives you a stock quote but hard to unload a futon or a sofa. And that vision has evolved over time into an online commons.
Q: What do you mean?
A: On the Net over the last several years people talked a lot about what they called disintermediation, which means for example for real estate, since people could do a lot of self service, they wouldn't need brokers. Well, what's really happened is that people have learned that good brokers add a lot of value and often can do a better job than self service.
Q: So what role do you think sites like yours will play in the property market of the future?
A: As the big profit-driven sites hit their customers with usage fees and intrusive ads, we think folks may turn to less commercial sites that focus on fulfilling the original promise of the Internet: to make life easier.