Shieldpay stories

Craigslist - The beginning of the end?

Craigslist is one of the darlings of the internet. 

But, for the first time in its 22-year history, its position at the top of the Internet’s classifieds tree is under threat. The rise of eBay, Airbnb, and other niche competitors, as well as the launch of Facebook Marketplace, has placed the long term future of the original online classifieds provider in jeopardy.


Taking advantage of mobile technology and their vast, existing user groups, the giants of technology have turned their attention to a space that Craigslist - a company that has never employed more than 50 people and carries no outside investment - has dominated for so long.

Is this the beginning of the end for Craigslist? Or is it merely an obstacle that one of the great Internet success stories will, yet again, overcome? To find out, we’ve looked back at Craigslist’s origins to see how it got to where it is today and looked forward at the challenges up ahead.


* * * * *

When Craig founded Craigslist

On March 1st, 1995, the newly-unemployed Craig Newmark put together an email for his close friends, listing art and tech events in San Francisco he thought they might like. Worn out, having worked non-stop in technology for many years, Newmark considered this time of reflection in his life as an opportunity to ‘give back’ to his community of friends and family. The first Craigslist - consisting of 10 people - was his way of giving something back to the people he loved. 

The small list started to blow up, with Newmark’s friends inviting others to join as they shared - via email - recommendations for exhibitions, concerts and events, before starting to tell each other about items they had for sale and job opportunities available in the local area.

Newmark couldn’t believe what he had started - but he quickly recognised the opportunity, and so he pumped his redundancy money into building a simple platform upon which users in San Francisco could share things they wanted to buy and sell with nearby friends.

The rest is history. In the 22 years since launch, countless companies and technologies have come and gone, but Craigslist has remained, thrived and grown into one of the most visited sites on the Internet. Newmark is now a billionaire.

 

Why Craigslist took off

From a business perspective, Craigslist is considered the definition of a cash cow. It is an ultra low tech, low staff and, thus, low cost business. It also never raised a dollar in outside investment (a failed partnership with eBay aside), and Newmark and the firm’s CEO, Jim Buckmaster, remain the only significant shareholders.

Craigslist was one of the very first internet companies to start building a list of users via a network effect, whereby the site gained more value as more people joined. Most importantly, despite being an online company, Craigslist created sites where local users could interact with other local users, creating classified ads for people nearby. This feeling of community created a hugely devoted user base, and it is these users who continue to use the service year after year.

The small fee that some pay for posting ads in certain categories - such as job adverts and ticket sales - has led to huge revenue for the company, with sales estimated at $694 million in 2016. Given the low cost nature of the business and an astronomical profit margin, the company is estimated to be valued at somewhere just shy of $10 billion.

The primary reason for this success is based upon the ethos that runs from the top to the bottom of the company - they never set out to make money, but they were always out to do good by the people who used the service. This meant charging next-to-no fees, first-class customer service, low expenses and staff numbers, and a focus upon building a simple product that did everything that customers wanted, but no more.

Despite the huge valuation, Newmark has no intention of selling, saying: "I am committed to customer service for the rest of my life. Death is my exit strategy.”

Which is honourable, to say the least. But is he talking about his own death or Craigslist’s? Because for the first time in its long and illustrious history its dominance may be under threat.

 

Craiglist’s threats, both big and small

The main threat to Craigslist’s dominance is coming from two sides - firstly, agile, ambitious startups and, secondly, incumbent, hugely popular behemoths.

It’s well known that in 2010 Airbnb used Craigslist to gain early momentum. Aware that Craigslist had a massive and relevant user base, Airbnb ‘hacked’ the Craigslist listings in order to market to huge numbers of potential users from the site. This nicely sums up the threat posed to Craigslist, with the unbundling of the classifieds marketplace beginning to take market share away from their approach of having one all-encompassing and all-conquering platform.

What Airbnb did for property rentals, Tinder and OkCupid did for personals, RedFin did for real estate, Etsy did for creatives. This list goes on and continues to grow as more startups join the race to take market share from the market leader. As in Airbnb’s case, some are having huge success, which raises questions regarding the future of Craigslist.

At the other end of the spectrum, the launch of Facebook Marketplace last year is a statement by a technology behemoth that the Craigslist cash cow is fair game to be slaughtered. Facebook’s feature gives users the ability to buy and sell items via a simple portal. Before launch, 450 million users were buying and selling via Facebook each month. Marketplace formalised that process and is a further attempt by Facebook to dominate ecommerce.

Facebook say the early growth of Marketplace has been significant, and they’re adding more categories by the month, with cars and holiday rentals recent additions. Given their 2.1 billion users - and 1.3 billion daily active app users - the scope and impact that Marketplace might have upon online classifieds and ecommerce could be huge.

It’s a case of “wait and see”, as Craigslist has played small, competed and won against behemoths, such as eBay, all of its life. But the Facebook threat is on another scale entirely.

 

Will Craigslist survive?

The success of Craigslist over the years has been rooted in its simplicity and the fact that it was based on something that felt entirely local.

In an internet-obsessed world, where you can watch video and read news from the other side of the world in an instant, this sense of home made people trust the simple buying and selling platform. But this is under threat from Facebook, who offer an unparalleled sense of community, as we all have a profile and a group of friends and family we’re already connected with.

And the sense of simplicity is being challenged by startups, who are copying the simple Craigslist proposition, but offering products in clearly defined verticals. If I want a holiday rental, I’m going to Airbnb. If I want to go on a date, I’m using Tinder. This specialization enables them to offer improved user experiences that drive engagement and ultimately, monetisation.

Will it survive? Only time will tell but the threat to its dominance this time feels different. 


* * * * *


For Craigslist’s millions of fans, it is heartening to note that in its 22 years, great technologies and companies have come and - largely - gone. Netscape, AOL, TiVo, MP3, the DVD… these are just a few technologies that have appeared and then disappeared almost without trace in the time that Craigslist has quietly grown to be one of the most visited websites on the web. 

Whether it remains one, remains to be seen. Given the companies that are now pursuing its market share - most notably, the biggest beast of them all, Facebook, who don’t tend to fail at much - its success and longevity could, for the first time in its history, be under significant threat.

What these developments mean for the future of the classified marketplace as a whole will also be fascinating to watch. The only thing we can be sure of is that there we will be further consolidation and fragmentation, winner and losers across the sector as we go into 2018.


***

We’d love to hear your thoughts on the future of Craigslist and where you think they're headed. Leave us a comment or chat to us on Twitter

And don't forget - if you want to hear from us a little more often, just subscribe to our newsletter for daily, weekly or monthly updates - it's up to you! 

SHARE THIS STORY | |
   

Want regular updates straight to your inbox?

Recent Posts