Part of Mesh07

One of the earliest businesses on the web Craigslist actually started as an email list in 1995 when Craig Newmark decided to send cool tech event listings to people he knew. Then as people started adding to the list he had an idea: what if these people could post all the new additions on a website? Well, in 1996 Craig did just that added a web interface and it has pretty much stayed unchanged for the past 12 years. Some of the reasons for its success, according to CEO Jim Buckmaster are that it has stayed true to its original roots and is useful “across all human needs.”

The approach that the site takes with respect to the user interface, translates right down to how the business operates. They are able to serve over 7 Billion PageViews per month with a small team. They have 24 employees and all work out of same dilapidated Victorian house in downtown San Francisco Of those 24 employees 2/3 are technology and the rest are in customer service. The site runs on open source software and is all about getting out of the way of the users.

They serve about 20 Million unique users per month using Linux, Perl, Apache, and compress pages 10 to 1. They endeavour to maximize Pageviews / kilowatt hour both from a business and green perspective; they are down to 175k pageviews/ kwh. Jim commented that they serve 7 billion pageviews on only 200 servers where Google is reported to be north of 1 million servers!

Given that basically none of their resources are devoted to marketing, how do they market if it is not a strategic imperative? They follow the lead of the users and try to make site as useful as possible and they believe that word of mouth traffic will flow from a good user experience.

One of the most important ways that Craigslist maintains its leadership in the online classifieds space is that in terms of product development the only things they work on are things that the users are asking for. In fact, in response to a question about whether the company is interested in the transaction market, Jim responded that virtually all exchanges on Craigslist are local and face to face, so there is no need for a payment engine. In contrast eBay has 90% of their transactions taking place at a distance and their requirements early on necessitated a transaction/payment engine.

One recent study estimated that if the site ran banners and other advertisements, it could be driving $1 billion in annual revenue. So the question arose about why they were not implementing this strategy? Jim noted that they were making enough money for all their needs, and focussing on the revenue would necessitate taking their eyes off of what the users want. He commented that the endless game of trying to make more money is not really fun and not taking external money allows them more freedom to do what they want to do.

Why is the company not focused on revenue? He responded that when you have no constraints and no psychological need for money, more money is not really necessary. The public companies are always measured by revenue growth so they are free to run company in a fun and meaningful way. They have no outside influences to push them in other directions which gives them more latitude to run the business as they see fit.

At this point, 90% of classified revenue is still in print but the costs online are lower, so the migration to online is continuing. Some newspaper commentators have stated that Craigslist represents all that’s wrong with newspaper industry. It may be part of a class of businesses that are changing traditional businesses but the newspaper industry is still 2x as profitable as average industry in the United States.

The site started charging for jobs in 1998 in San Francisco. Craig asked the users how to raise revenue and they said to charge for postings. What happened is that the quality of jobs were higher as paid listings were instituted as it took out “job spam.” Some might say that fees were the ‘lazy mans’ tool to take out substandard listings, in contrast to putting a coder in to work on the problem. Now they charge for job ads in 7 cites and brokers in NYC pay for apt listings. Their expansion plans call for more cities, more categories and more languages.

Categories
innovation