The Local Internet
The weekend before Thanksgiving, I moved into a new apartment. Besides marking the first time I have lived outside of downtown Los Angeles, the move also signified another first, my using Craigslist to sell stuff. The results truly speak for themselves. Within one week, I pretty much liquidated my entire place – selling all of my bedroom furniture, a bed and frame, my living room furniture, old desktop computer and desk…everything but the kitchen sink – the kitchen table was sold. In more than one case, I had a reply within two minutes of posting and even a bidding war on one item. This type of transactional power is remarkable and worth every penny; yet, most amazingly, this value added service to me cost only my time and some market inefficiencies in pricing.
It’s no wonder eBay wanted in, being the lucky purchasers of a dissident shareholder’s stake in 2004. And, while I feel I am almost embarrassingly late to the party, the numbers show I am not alone. According to the now widely quoted study from the Pew Internet Project, in September 2005, 32 million adults went to classified sites “to sell items, look for jobs, or meet people.” That number represents an 80% increase compared to the same period last year and a drop in the bucket of what these sites will receive. And, given my experiences above, it is no wonder that almost a quarter of those who have gone to an online classifieds’ site went to Craigslist. That site saw its traffic increase by almost 160% compared to the same period last year.
Microsoft might seem lagging with respect to many of their internet activities, it would seem they do not want to make the same mistake with the online classifieds business, of which Craigslist dominates. News came out just two days ago of Microsoft’s Freemont service, now in limited beta. The Craigslist competitor is an integral piece of their Web 2.0 Microsoft Live product line and strategy. The stories surrounding Microsoft’s Freemont come just two weeks after the official launch of Google Base. The two differ in that Microsoft’s Freemont is expected to follow a Craigslist approach of allowing users to place items into pre-defined categories, whereas Google Base follows that company’s traditional approach of retrieving information based on user queries and not through a hierarchy. This not only fits well with other Google products and monetization infrastructure but also keeps their Base from seeming like a direct competitor to Craigslist.
Despite the recent press around online classifieds, Craigslist has celebrated more than a decade online; its unchanged appearance and almost un-capitalistic actions have kept from being a target in the minds of other online players. Instead of charging for every post by sellers, it charges only for job postings in select cities, fewer than 5% all together, the modest fees not so much for revenue but clutter control. Yet, despite the limited number of income streams, Craigslist most likely brings in $15mm to $35mm annually, more than enough to support the 20 to 40 employees. Under a different strategy that number could easily be 10x to 20x, numbers that make an under the radar existence almost impossible to continue. This is especially true as traditional newspapers feel the impact of online media and its erosion on their “river of gold” revenue source, as Rupert Murdoch once put it, classifieds. As he says on their decline, “This is a generational thing; we’ve been talking a 15- or 20-year slide on this. Certainly I don’t know anybody under 30 who has ever looked at a classified advertisement in a newspaper. With broadband they do more and more transactions and job-seeking online."
A lot will be said about Microsoft Freemont and Google Base, the former referencing a Sunday market in a Seattle neighborhood, the latter a potential pun of the word database or perhaps an esoteric reference to the classic 1989 console game Zero Wing. Interestingly, in a seemingly ironic transition, Craig Newmark, the “Craig” in Craigslist has made news of his own surrounding his intention to enter the journalism space. The irony comes from the classified killer entering an arena dominated by a traditional media goliath now making news entering the online space, Rupert Murdoch. For a great read on the latter and why Rupert Murdoch has a great position moving forward, see Mark Pincus’ “If i were rupert murdoch…my roadmap…”
Perhaps the real sign of success and opportunity of online classifieds sites comes not from an entrance by Google or Microsoft but by the arbitrageurs. In a recent search for housing I came across more than one listing referencing a website. The website it turns out was a paid site and the person behind the post an affiliate. If opportunity knocks, or just leaves the door unlocked, we can expect an arbitrageur to answer. Their actions indirectly help prove that classifieds as a channel have just begun to thrive online. In 10 to 15 years, it might not be the Internet but some form of digital media where classified-like activity occurs. With respect to online, classifieds are the local killer app. But, the local Internet is not just about Craig, or even Google, Yahoo, and Microsoft. It’s really about us getting what we want – a pillar in the ever-quickening trend towards user generated content, user control, the localization of the Internet, and social networking/community. It’s certainly been the formula for Craig’s success as well as some of the most popular sites on the horizon.
