It’s the social part that is the killer

As we all know by now, Facebook is the new black. It’s the social network by which other social networks are judged — even MySpace, which it may already have eclipsed in terms of page views, if not users. So when it launches something it’s definitely worth paying attention, especially when it is something like classified ads, which Craig Newmark and the gang over at craigslist.org have turned into a low-price battleground.

facebook_cake1.jpgThe always-insightful Scott Karp at Publishing 2.0 (who is also clearly a fan of the Cutline theme for WordPress, as I am) says this is another blow for newspapers, and he’s right of course — although they have taken so many body blows in the classified arena, both external and self-inflicted, that it’s getting hard to spot the individual bruises. Donna Bogatin at ZDNet makes the point (while arguing with my friend Mark Evans) that the classifieds on Facebook will not be open to everyone, since Facebook requires you to be a member, and people posting classifieds can choose who can see them), which is a fair point. But it’s not going to help.

It’s clear to me, as it is to Scott, that one of the things that makes Facebook so powerful as a competitor in this particular space is the social aspect it brings. Does anyone feel like they have really connected with someone through their newspaper classifieds? Unlikely. But Facebook and other social networks — including craigslist — are more like the bulletin board at the local campus centre, multiplied by a million. That is a powerful force.

To be quite honest, I’m not sure whether newspapers can compete on that level, since the amount of time and effort they have put into becoming a social network for their communities is in most cases approaching zero.

Craig and Wall Street — universes apart

It was a few days ago now, but the New York Times’ DealBook blog had a great little item about Craigslist CEO Jim Buckmaster meeting with Wall Street types at the UBS global media conference. Naturally, the analysts wanted to hear a bit about the gazillions of page views that Craigslist gets, and how it is making about $50-million or so a year without even trying.

Jim, however, said the site had no real interest in maximizing revenue. Although he and Craig had looked at running ads, they had no plans to do so, he said, because — get this — users hadn’t said they wanted them. The only reason that Craigslist charges fees at all (to professional real estate agents for posting apartment ads in several cities) is that users complained about the ads, so the fees were instituted as a way of driving them away.

craig newmark.jpg

In the DeaBook pieces, Wendy Davis of MediaPost describes the presentation as a “a culture clash of near-epic proportions.” She says UBS analyst Ben Schachter asked how Craigslist planned to maximize revenue. We don’t have any such plans, Mr. Buckmaster said. “It’s not part of the goal.” Mr. Schachter’s response: “I think a lot of people are catching their breath right now.” I’ll bet.

Craigslist currently gets a mind-blowing 5 billion page views or so a month. A premier site like Craigslist — and one that is focused on classified advertising, which is inherently purchasing-type behaviour — would likely command a fairly high CPM rate for ads. Let’s say theoretically it was $10 per thousand. That would bring in $50-million a month (StartupBoy says Craigslist is worth more than eBay, and he doesn’t even include ads).

But Craig would rather focus on the user. Brilliant? Or deluded?

Update:

Kevin Burton of TailRank says that Craigslist should be taking all that money from advertising and giving it to the poor (he expands on that idea here), but that Craig “thinks money is evil” (Craig responds in the comments that that isn’t true). Chuqui says Kevin and others should leave Craig alone and that Craigslist is being true to its vision. The Scobleizer agrees, and so does Nick Douglas at Eat The Press. And Dan Farber and larry Dignan at ZDNet took on this issue back on Dec. 7

Listifieds — Web 2.0 lowers the barriers

Here’s a Web 2.0 story for you: I got an email pitch from a guy named Kevin the other day, letting me know about the Web-based classified ad service that he and his buddy Chad put together in their spare time. Called Listifieds.com, it’s based in the thriving metropolis of Bowling Green, Kentucky (which I remember primarily because it’s where John Prine says his grandmother taught school in the great old song Grampaw was a Carpenter).

Kevin says he and Chad at first planned to focus their service on Bowling Green exclusively, but then they got lots of positive feedback and decided to take it national. Of course, the first thing that came into my mind was how crowded the national classifieds market is, what with newspapers fighting to stay competitive, Craigslist dominating in dozens of major cities and newer entries such as Edgeio.com going after the Web business aggressively.

Is Kevin worried about any of this? Nope. He says “we realize it’s a crowded market but believe we can stand out with our combination of clean design, usability and feature list. We’re not looking to get rich off of it.” He figures they will sell featured listing spots and maybe banner ads to local businesses. In other words, putting together the site — in relative terms — probably didn’t take that long or cost that much, and scaling it larger probably won’t either (here’s a tip, Kevin: check out Amazon’s S3 and EC2 services if you start to get a lot bigger).

listifieds

I asked Kevin in an email about Craigslist and eBay and Edgeio and others, and here is what he said (some sections clipped for space):

Clearly we don’t have the brand awareness, the marketing resources, or the money that these other sites have. But I also think the market is fragmented and in transition right now.

I think craigslist isn’t that well known outside of the big cities it operates in. I think eBay is almost always associated with auctions, which some people don’t like… I don’t put Edgeio in the same category as the other sites because I believe it has an identity crisis, isn’t that well known beyond the web 2.0 crowd, and in my personal opinion, it is confounding to use.

In my opinion, we have the cleanest, clearest, easiest to use interface; We aren’t limited to big cities like craigslist; We have longer listing run times — up to 180 days for certain listing types; We offer plenty of photos and ways to describe your listing; We offer some nice tools… rss feeds, listing alerts, saved listings, recently viewed listings, website widget.

We think we have something good to offer, so we intend to give it a try and have fun doing it. If nothing else, we can say “our service is free too, why not list with us also?”

If I were being brutally honest, I would say Kevin and Chad’s service doesn’t have a snowball’s chance in hell of becoming a major force in classifieds nationwide. However, it could probably become a pretty good little business in some smaller regional markets, and there is nothing wrong with that at all — and Kevin and his friend should be congratulated for giving it a shot. What do they have to lose? That’s Web 2.0 in a nutshell.

Craigslist — a giant cash machine

Thinking about how much money Craigslist could potentially make — if it wanted to — still boggles the mind. I came across a little item from Bloomberg about Craigslist adding fees in four more major cities: $25 for professional job listings in Boston, San Diego, Seattle and Washington. And what is that expected to do to revenues at the company? Um, let’s see… would you believe it could boost them to $50-million next year, or double what they were last year?

Consider this: Adding those four cities makes for just eight cities out of the 57 or so that Craigslist currently operates in (although some of those are relatively small). And those fees are only for professional job and (in New York) real estate listings. In fact, Craig has said his major impetus in adding fees is simply to cut down on the amount of listing spam. Adding fees for jobs in a few more cities, or for real estate in a few more cities, could theoretically boost Craigslist’s revenue by another $50-million or so.

craigslist

And those are fees that are $10 or $25, which is drastically cheaper than existing outlets. Bump up a fee here or there, add one here or there — just for professionals of course — and it doesn’t take long before it’s pulling in revenue of $200-million or so, without even trying. Some think it could get significantly larger than that. Oh yes, and one more thing: This company has a staff of just 14 22 people, and costs that are probably in the $5-million range at the outside.

Is it any wonder Craig’s main job right now is fighting off venture capitalists? Too bad he isn’t interested in money. And as Haydn points out in a comment here, pushing the money thing too far would no doubt wreck much of what makes Craigslist unique. PaidContent has some more on Craigslist revenues here.

Online classifieds become a battleground

Online-classified service Craigslist.com is extremely popular, with close to 9 million unique visitors in September according to some estimates. So how much is it worth? (figuring out how much various Web services are worth seems to have become a new sport).

Based on Om Malik’s rough rule of thumb from recent deals for companies such as MySpace.com and Weblogs Inc., which he said produced an average value of $38 (U.S.) per unique monthly visitor, Craigslist would be worth about $330-million (by way of comparison, that’s about 16.5 times the company’s revenue, which is higher than the range that Jason Calacanis thinks is reasonable for an online property, but a lot less than the almost 70 times revenue eBay agreed to pay for Skype, based on the $4.1-billion price tag).

The value of Craigslist might be about to go down, however, as the online classified game heats up. There’s Google Base, for example, which admittedly is rather confusing to use and therefore perhaps less of a threat (or more, depending on who you believe). And then there’s a little company whose name begins with “Micro” and ends in “soft.” The behemoth from Redmond is rumoured to be launching a new online-classified style service codenamed “Fremont,” according to various sources, including TechCrunch.