The Craigslist Business Model – How Does Craigslist Make Money?

Executive Summary:

Craigslist is an online classifieds marketplace that allows anyone to post listings on its platform. Listings can be uploaded in categories such as services, jobs, or items for sale.

Craigslist makes money via posting fees. The company charges anywhere between $3 to $75 for uploading a listing in a few, selected categories.

Founded in 1995 and headquartered in San Francisco, California, Craigslist has grown to become one of the world’s most visited websites. Close to 500 million people visit its website every month.  

What Is Craigslist & How Does It Work?

Craigslist is an online classifieds website. Users can browse listings in various commercial categories, including:

  • Services, such as beauty, lessons, or legal
  • Jobs, including accounting, real estate, marketing, engineering
  • For Sale, offering anything from TV’s to tickets

Once a user discovers a product or service they like, they can directly get in touch with the person via the contact information provided on Craigslist’s website.  

Apart from its commercial offerings, users can also engage in the various discussion forums that are live on the website.

Craigslist is segregated by geography, meaning each city, state, and country (Craigslist is available in over 100 countries across the globe) can access their own version of the platform.

To this date, Craigslist has stayed true to the initial design that it launched with in the mid-1990s.  If users like a more modern touch, they can download the platform’s mobile phone app (available on Android and iOS).

Craigslist Company History

Craigslist, headquartered in San Francisco, California, was founded in 1995 by Craig Newmark. A self-proclaimed nerd, Newmark spent the first 18 years of his career at IBM where he assisted other clients as a technical support engineer.

After tenures in Detroit and Pittsburgh, Newmark decided to spice things up and move out west. In 1993, he joined Charles Schwab and subsequently moved to San Francisco.

When he arrived in San Francisco, Newmark started emerging himself in local programming events and get-togethers. To keep himself and his friends up to date, he started an email list that would notify everyone about the events that would take place.

That email list became a fun side project of his but after a while took on a life of its own. Eventually, people started posting other content such as the furniture they would sell. People even started buying cars from each other off of that list.

At some point, everyone’s inbox was cluttered with updates, making it an absolute mess to handle and navigate. To streamline the content, Newmark decided to put up a simple website that would list all the offerings.

His email list became known under the alias “Craig’s List” and friends of his suggested to name the website in a similar fashion. Craigslist.org went live in 1996.

Newmark registered Craigslist as a .org because the site was launched as a non-profit. But soon after, the website was started being used more and more for commercial purposes. One of those frequent users became Christina Murphy, a tech recruiter out of San Francisco.

She had frequent calls with Newmark as a result of frequently screwing up her job postings. Murphy, along with an IT consultant called Nancy Melone, began discussing a more professional foundation of Craigslist.

In 1998, the trio launched a non-profit called List Foundation where recruiters would pay $30 for job ads. Melone was the company’s CEO. For over a year, the site was available under 2 domains, namely craigslist.org and listfoundation.org.

Unfortunately, tensions between Melone and Newmark quickly started to emerge. The former wanted to accelerate growth, seeing how comparable dot-coms were raking in billions during their IPO’s.

Newmark, on the other hand, wanted for things (such as the price for an ad) to remain as is. These tensions led to an inevitable split. On a faithful day in September 1999, users who tried accessing the List Foundation domain would be automatically redirected to a for-profit website called MetroVox.

Blindsided by the move, Newmark quickly urged his users to not visit the List Foundation domain anymore. Due to the years-long relationship he had built up, they followed his command. A few months later, the bubble burst, and MetroVox was shut down.

To avoid a similar incident, Newmark decided to run Craigslist as a for-profit organization. Furthermore, acknowledging that he lagged the managerial skills to run a larger organization, he subsequently handed over the reins to Jim Buckmaster.

Buckmaster joined Craigslist’s team of 10 as a software programmer in 2000. In 1986, Buckmaster dropped out of medical school at the University of Michigan but continued to hang around campus to study classics and doing data entry work.

He eventually began teaching himself how to program and went on to join Creditland as a software engineer in 1999. At Creditland, he found himself constantly clashing with the sales side, which imposed unrealistic demands on the engineers.

A few months later, he posted his resume on Craigslist where Newmark eventually discovered it. After Newmark hired him, he began working on a few features such as the site’s search function. A few months in, Newmark asked him to lead the company as CEO, which he has done ever since.

In the following years, Craigslist’s popularity continued to rise. By August 2004, the site had surpassed 1 billion monthly page views for the first time, making it one of the most frequented websites in America.

That same year, eBay invested $32 million in exchange for receiving a 28 percent stake in the company. That became one of the inaugural moments in the firm’s history – and the cause for future legal battles (more on that later).

Over the next few years, Craigslist continued to add more cities and countries to its platform. The firm stayed true to its San Francisco roots until 2000 but then decided to expand across the United States.

In 2006, Craigslist announced that it would add another 100 cities to its portfolio, both from the States as well as other countries such as Malaysia, Portugal, or Pakistan.

While Craigslist continued to rise in popularity, it started to face scrutiny – both from the court of law as well as other businesses.

For once, the platform had been known for having listings that would encourage prostitution. In 2008, 2 people were murdered after meeting with a supposed client that was seeking erotic services. The murders led South Carolina’s attorney general to threaten the platform with potential litigation.

As a result, Craigslist created a dedicated adult section on its site that it was required to frequently monitor. Others speculated that the threats of the attorney general were simply a result of the heavy lobbying conducted by the newspaper industry.

The rise of Craigslist, which charged considerably lower for its classifieds, led to heavily declining revenue figures for many newspapers. In 2014, Harvard researchers calculated that Craigslist had cost the newspaper industry $5 billion between 2000 and 2007.

The continuous lobbying ultimately led to the closing of Craigslist’s adult section in 2010. Removing ads for erotic services evaporated nearly a third of the company’s overall revenue. Despite the heavy blowback, Craigslist’s popularity remained high.

Craigslist did everything in its power to protect that popularity. In 2012, it had made dramatic changes to its terms and conditions. As a result, Craigslist became the exclusive licensee of the content generated on its platform, which granted it the ability to sue anyone that used it without permission.

That same year, it sued Padmapper and 3Taps for using its classified data without the company’s consent. As a result, both sites had to take the content down.

Nevertheless, Craigslist gained some inspiration from its interaction with Padmapper. In October 2012, it introduced a new Map View feature that displays apartment locations across cities. The feature marked the first significant change to its platform since it introduced a new design back in 2005.

At the start of the 2010s, more and more businesses started to emerge and tried to offer a better user experience in some of the verticals Craigslist operated in. Examples included Airbnb in the vacation rentals space, Tinder for dating, or OfferUp as a supposedly safer version of its For Sale section.

Yet, Craigslist’s user growth remained unphased by the rise of other competitors. Many argue that by keeping the site easy to navigate and its design unchanged, users eventually just grew accustomed to the Craigslist experience.

craigslist company history

Furthermore, being an online marketplace with tremendous supply makes it naturally hard to replicate its business. After all, there will always be a listing available for any need. And if not, then users can at least get inspired by some of the obscure listings found on its platform.

Lastly, its discussion forums offer plenty of opportunities to connect, which keeps users in need of social interaction coming back to the platform. By being available in over 700 cities, Craigslist’s hyperlocal approach makes it essentially accessible to anyone.

Knowing the asset they had under their hand, the founders made sure to maximize their control. In 2015, they purchased back the 28 percent stake that eBay had acquired back in 2004. The buyback marked the end of a decade-long dispute between the 2 platforms.

eBay had started a competing classifieds service named Kijiji back in 2007, which later became known as eBay Classifieds. Craigslist retaliated by diluting the shares eBay owned (from 28 to 25 percent), which led to various legal altercations. eBay eventually won the legal dispute in 2010.

Getting back portions of his ownership stake allowed Newmark to spend more on the philanthropic efforts he started to engage in.

In 2018, he donated $20 million to the CUNY Graduate School of Journalism, a move that received both positive and negative responses. After all, critics argued that Newmark himself was responsible for the declining revenue and struggles of the newspaper industry. Many other donations have followed ever since.

A year later, in December 2019, Craigslist announced a move that would catapult it into the 21st century by launching an Android and iOS app, respectively. It came as no surprise though the app has not been updated ever since it was launched.

Today, Craigslist remains to be one of the world’s most frequented websites. It records over 400 million visitors every month (equating to around 50 billion monthly page views) while being available in 70 countries across the globe.

How Does Craigslist Make Money?

Craigslist makes money by charging a posting fee on selected categories. Users are charged with the following rates when uploading a listing on Craigslist:

  • Job postings in the United States, ranging from $10 to $75
  • Apartment rentals in selected cities (such as Boston, Chicago, and New York) and commercial real estate listings, costing $5
  • All for sale by-dealer offerings, ranging anywhere between $3 to $5
  • Cars and trucks offered by dealers as well as cars/trucks, RVs, and motorcycles by owner for $5
  • Furniture (only for Vancouver listings), costing $3
  • Gigs in the United States and selected Canadian areas, ranging between $3 to $10
  • Service offerings in the United States and Canada for $5

Apart from the above-mentioned prices listing on Craigslist remains free of charge. The firm essentially operates on a freemium model, which helps drive growth and retain customers.

In the past, others have speculated that Craigslist would add other monetization streams, such as charging third-party platforms for access to its data.

Instead, Newmark and Buckmaster decided for the platform to remain as inexpensive as possible. That particularly angered the newspaper industry which was notorious for charging high prices, sometimes up to $150, for a listing.

Craigslist Funding, Valuation & Revenue

According to Crunchbase, Craigslist has raised a total of $13.5 million in 1 funding round. Online marketplace eBay invested in a venture round that was announced in August 2004.

Given that Craigslist remains to be a private company, its valuation is not disclosed to the public. With estimated annual revenues of $760 million, its valuation probably ranges anywhere between $2 billion to $3 billion.

With an employee base of around 50 people, the company generates roughly $15 million per employee, making it extremely profitable.

Who owns Craigslist?

Craigslist does not disclose its ownership structure to the public. With its share buyback from eBay in 2015, it is believed that the company is fully owned by founder Newmark, CEO Buckmaster, and a few selected employees.

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Hi folks, my name is Viktor! By day, I lead a tech team of 10 folks for an e-commerce startup. At night, I work on expressing my weird thoughts through this blog. And if there's time, I cuddle my cat..