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Craig$list.com 

The much-loved Web site is taking millions from Bay Area newspapers and causing layoffs that adversely affect coverage. And its founder's well-intentioned support of citizen journalism has a slim chance of fixing the problem.

Wednesday, Nov 30 2005
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In 1993, after 17 years as an IBM programmer on the East Coast and in the Southeast and Midwest, Newmark decided it was time for a change. He fled to the Bay Area and began a job working on Charles Schwab's computer architecture. Two years later, he started an e-mail list to alert friends to local events. As subscriber numbers grew, people started sending in apartment and job listings, so Newmark created Craigslist.org to display their posts. When Buckmaster joined the company in 2000, Craigslist was still based in Newmark's Cole Valley flat, but the site attracted hundreds of thousands of monthly visitors. In the meantime, to keep pace with costs, Craigslist began charging a small fee to businesses that posted job listings, and incorporated as a for-profit.

During the dot-com bubble, thousands of start-ups that originated as free sites (including Yahoo!, eBay, and Google) monetized their services on the way to multimillion-dollar public offerings. Newmark didn't. First implicitly, and later deliberately, with the help of community input, he made decisions that undoubtedly left millions of dollars on the table. He pledged to keep the site as free as possible for users and refused to accept advertising. Newmark was two decades older than most of the bubble-era wunderkinds; he knew that taking venture capital funding meant giving up control of the site, so he rejected investment offers. Newmark and Craigslist's early employees were the site's sole shareholders until last year, when an ex-employee sold a minority 25 percent stake to eBay.

The economy tanked, but that only drove more bargain hunters to the site. Small businesses that balked at paying $500 for a help wanted newspaper ad turned to Craigslist -- in San Francisco, it costs $75 to post an ad, in New York and Los Angeles $25, and everywhere else, it's free. Since then, the growth has only accelerated. Recently added cities such as Raleigh and Dallas have as many as nine times the number of monthly page views as a year ago. Craigslist.org's no-frills design may look like a personal home page circa 1995, but it's among the top 10 most-viewed sites on the entire Internet, up there with places like Google.com and Microsoft.com. Every month, 10 million people worldwide click through 3 billion pages of Craigslist.

Newmark never expected any of this: millions of people typing his name into their Web browser, millions of dollars pouring into a site he launched on a whim, his creation having a significant effect on the media. "Everything about Craigslist," he says, "is an unintended consequence."

Just how much money Newmark and Buckmaster have pocketed from this accidental success is unclear. When it comes to Halliburton, they're all for the press asking tough questions. As for Craigslist's own finances, their mouths are shut.

"We find the whole subject of money just causes a frenzy of debate. That serves as a distraction for us. I could be fielding questions or I could be doing customer service," Newmark says. "What's the point? I can't think of any positives. It does seem to be pointless. I can only see negatives."

Until recently, Craigslist displayed the number of job postings in San Francisco, New York, and Los Angeles, as it now does for every other category in every other city. Take those numbers averaged over a few months, multiply by the cost of posting, and you could roughly estimate the company's revenue. Earlier this year, the site took those numbers down. Newmark, however, still manages to sing the praises of financial transparency. "We're as transparent as anyone," he says. "We're probably in the top percentage or two of transparency of companies."

Not counting, of course, the thousands of public companies that, unlike Craigslist, actually report their revenues and earnings publicly. When pressed, Newmark uses another debater's trick, transferring the blame from his own company to Enron and Tyco: "People think we know how much public companies make. But we've seen a lot of that apparent openness is often wrong, because things are buried, things are misleading, sometimes deliberately."

As a private for-profit, Craigslist doesn't have to publicly disclose anything. SF Weekly parent company New Times doesn't release many financial details, either. Newmark, though, views his creation as something different. "We do a better job as a nominal for-profit," he says, "but we exist in a category that doesn't really exist in the law."

That "category" allows Newmark to keep the domain Craigslist.org, a name that gives the false impression that the site is a nonprofit, by using ".org," an extension almost exclusively used by nonprofit companies and foundations. Craigslist's marketing materials call this "a symbol of our service mission and non-corporate culture." (Craigslist.com, which the company also owns, draws far less traffic.) It permits Newmark to use the word "non-commercial" twice on Craigslist's "Mission and History" page, and to bury the phrase "No charges, except for job postings" in the third line from the bottom. It means establishing a separate nonprofit, the Craigslist Foundation, which trains other nonprofits in marketing, technology, and fundraising skills, but makes no grants, has no endowment, and charges for many of its training events. This year, Craigslist will provide less than half of the foundation's $240,000 budget.

"We are a marketplace, like a flea market," Newmark says. "A flea market is more social and entertainment than commerce. In more formal terms, we are a community service. We have a company structure because that's the way life works, but that's kind of tertiary."

Even Buckmaster admits that Newmark's vision is a little utopian: "He still has trouble seeing us as a corporation, and taking seriously all the things that a corporation has got to do."

Newmark's financial secrecy conflicts with his idea of what Craigslist is, but so does the amount of money Craigslist makes. The revenue range often reported for Craigslist is $7 million to $10 million per year -- successful, but not extraordinary, for a company with about 20 employees. However, the job postings on the Bay Area Craigslist indicate a much larger number: more than 20,000 ads, or $1.5 million in revenue, this month. Add in 14,000 jobs this month in both Los Angeles and New York, and that's $2.2 million. Even assuming November is by far the busiest month, and that Craigslist doesn't charge for most ads by nonprofits, that puts the site's estimated revenue stream at $20 million per year -- minimum. To be sure, that's less than 1 percent of the revenue of sites with similar traffic levels, and Craigslist only charges for a tiny percentage of ads, but that doesn't erase its millions in hush-hush profits.

About The Author

Ryan Blitstein

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