The Best Business

Models Are the Simplest

Case In Point: Craigslist.org

By Ben Hart

No need to over-think your business model.  Just provide a good service.

The Internet phenomenon known as www.Craigslist.org is a case in point.

In 1995, Craigslist started out in San Francisco as a bare-bones bulletin board site for people looking for almost anything -- such as apartments, used cars, dates, or baseball tickets. 

Its founder Craig Newmark, now age 55, started the site originally as just a way to inform friends about upcoming art and technology and as a place to post his resume.  He was unemployed at the time.

Today, Craigslist brings in about $25,000,000 a year and Ebay recently bought a 25% stake in the company for $15,000,000.  Not bad for a company that has only 12 employees.

Newmark, a 1960s throwback, is not even focused on profits. 

Craigslist charges $25 for job postings in six of its largest U.S. cities and $75 for job listings in San Francisco (its home base). Craigslist also charges a $10 fee for apartment listings in New York City.

And that’s it. 

All other listings and classified ads free.

Most people think of Craigslist as a classified ads site.

But actually it’s more like a 21^st Century supermarket bulletin board.

If you are not familiar with www.Craigslist.org, take a looking it right now.  Note how amateurish the design is.  In fact, it really doesn't have much of a design at all -- just kind of a hodge-podge.

For Newmark, Craigslist remains more of a hobby than a business. 

He does not allow banner ads or Google AdSense text ads on the site. 

When asked why, since this would be an enormous source of ad revenue for Newmark, he answers: “because our users have not asked for them” – as if that’s an answer.

Here’s a fascinating excerpt from an interview with Newmark conducted by InternetNews.com that gives you an insight into the mind of the founder:

Q: What kind of business model did Craigslist Create?

A: We really don't have a business model. We are a community service, and we found some years ago that we could provide a really good service to employers and recruiters. Then we asked our community, "What is the right thing to do along these lines?" They told us to charge the people who would otherwise be paying more money for less effective advertising. And that has helped set our moral compass. We are charging recruiters and employers in San Francisco, Los Angeles and New York.

Q: With eBay holding a 25 percent stake in Craigslist, do you still consider the online auctioneer a competitor?

A: We overlap a little bit, but we do similar good things for the community. Right now there is plenty of classified business for everyone, and we really don't think we are competing with people.

Q: We hear a lot about how Google's business model is actually built on the concept of others creating its content. The same is true for Craigslist. So would that make you a really smart aggregator?

A: I wouldn't put it that way. That would involve a change of mindset I'm not capable of right now. We provide a community service that helps people. Google has a very different business model.

Q: To what would you attribute the success of Craigslist?

A: A really good culture of trust, and we are a simple and effective site. We are kind of like a flea market, and flea markets have a social aspect, as well as a commercial aspect.

Q: Is keeping it simple something you've been conscious of from the outset in 1995?

A: Yes. I only know how to do things simply. We're lucky that I have no talent with Web design. Initially, we only had two links: us as we existed and the other was my resume. Then at some point it became four links plus my resume. There were events, jobs, apartments and everything else. It just grew from there. So what we have today is a direct evolution of what we had all that time ago.

Q: It has been reported recently that Craigslist is costing newspapers in the Bay Area $60 million in advertising revenue. Do you see Craigslist competing with newspapers for ad dollars?

A: I don't know if I believe that about the $60 million. And again, I keep saying that there is a lot of classified business out there that newspapers could get.

Q: What is the next big thing for Craigslist?

A: I don't think there is a "next big thing." We are just talking about incremental improvements continuously.

Q: People have offered to buy Craigslist. Would you ever sell it?

A: No. I've done well enough. The fundamental question for any human is how much money do you need to make?

Craigslist is yet another illustration of how the best business models are the simplest.

Questions to Ask Yourself

As You Study the Craigslist Site:

1) What are the key elements that have made Craigslist work so spectacularly well?

2) How might you apply some of these principles to your business?