How Does Craigslist Make Money: The Rise Of Craigslist

Ethan
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THE SCALE OF CRAIGSLIST

Did you know that Craigslist is the 79th most visited website in the entire world? In fact, Craigslist beats out several heavy hitters including Target, Yelp, Shopify, and even Snapchat. With 250 million monthly active users, Craigslist isn’t that far behind Amazon who boast just over 300 million monthly active users though it should be noted that Amazon shoppers are likely way more trigger-happy. 

It’s not clear how many dollars worth of transactions happen on Craigslist every year. But with that much scale and market share, Craigslist could easily be a multi-deca billion company even if they just charged a modest fee of 3% per transaction. If they charged something more substantial like Amazon of 8 to 45%, they could probably be a $100 billion company. But in reality, Craigslist is nowhere near those figures. 

How Does Craigslist Make Money


In fact, Craigslist is lucky to even pull in $1 billion per year because they don’t make a single cent on the vast majority of Craigslist transactions which is by design. Craig Newmark, the founder of Craigslist, definitely wanted the venture to be viable and profitable, but he was never looking to create a tech juggernaut. 

His primary goal was always to just connect buyers and sellers with no BS or thrills for as cheap as possible. And given that north of a billion dollars translates to nearly $20 million in revenue for each of his 50 employees, Craig has never tried to take monetization to the next level. In fact, that’s why Craigslist looks like it hasn’t been updated in decades. It’s because it hasn’t been. 

Of course, Craig’s team addresses any UX issues or bugs as soon as possible, but in terms of playing the UI game and maximizing user retention, they’re just not all that interested. As far as they’re concerned, they’ve created a reliable platform that serves a purpose. If that interests you, great. If not, no worries.  

Craigslist is basically the antithesis to everything big tech stands for whether it’s infinite growth, maximum profits, or unlimited funding. But while they may not be the most lucrative website in the world, they’re no doubt one of the most impactful. So here’s the insanely humble rise of Craigslist. 


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HUMBLE BEGINNINGS

Taking a look back, the story of Craigslist dates back 70 years to December 6, 1952, in Morristown, New Jersey. Craig was born to a middle-class Jewish family that was pretty ordinary. His parents held jobs like being a bookkeeper, an insurance agent, and a meat salesman. That was until Craig turned 13 and his father died of cancer at which point everything became a lot harder. 

The point at which Craig realized that he had to fend for themselves start a business and work his way up. But, in reality, this was nothing more than a sad and depressing time for Craig. He didn’t have much of a social life to begin with, and now without his father, he was not only a nerd but a broke nerd with thick glasses held together with tape. 

I don’t think being part of the school choir, the physics club, the debate club, and the honor society really helped Craig’s case either. According to Craig himself, he was possibly nerd patient zero. To help him with his social troubles and the passing of his father, Craig was regularly sent to have therapy sessions with his school counselor, but his counselor eventually gave up on therapy and just taught him chess instead. 

Over time, things got much better for Craig financially. After graduating high school in 1971, Craig would attend Case Western Reserve University. There, he earned a bachelor's and master's in computer science and entered the burgeoning industry of tech. 

Craig would score a programming job at IBM straight out of college where he helped enterprise customers like Bank of America and Sun Microsystems implement IBM solutions. This was akin to landing a job a Google today. 

So, little to say, Craig never really had to worry about broken glasses or money ever again but other aspects of his life didn’t quite improve in the same manner, specifically his dating life. And it’s not like Craig didn’t try either. 

In fact, Craig would join ballet and jazz dance classes to meet women but given that he wasn’t exactly in the best shape of his life, he would end up at the hospital with a hernia. Before you knew it, Craig had been working at IBM for 17 years and he was in his early 40s. 

At this point, it seemed like Craig’s fate as a lost geek who spent his entire career at a legacy tech company was basically sealed but Craig wasn’t willing to accept that. He felt that what he needed was a completely fresh start in a new city with new surroundings. So, with a burst of energy, in 1993, Craig would quit his job at IBM, get a new job at Charles Schwab, and relocate to San Francisco. 

And just as Craig hoped this would indeed turn into a major turning point in his life. Unlike Detroit where he used to live, in San Francisco, computers were not the nerd thing to do but the cool thing to do. Craig started socializing with a bunch of computer geeks who hung out at cafes and discussed the revolutionary future of tech. 

It was during one of these sessions that one of his coworkers from Schwab would introduce him to something called the World Wide Web, and this would completely change the trajectory of Craig’s life. 


HUMBLE RISE

Jeff Bezos was introduced to the internet around the same time. He saw that the internet was growing by hundreds of percent every year and saw massive opportunity. Craig on the other hand saw something completely different. From his perspective, the internet was the perfect gateway to network with other like-minded individuals and finally build a social life, and that’s exactly what he did. 

He started regularly emailing all of his friends from work about tech events that they could attend together. Oftentimes, his friends would forward these emails to more friends who in turn forwarded them to even more people. 

Pretty soon, Craig’s emails started reaching dozens of people most of whom, he didn’t even directly know. Seeing this interest, Craig came up with the idea to create an email list that people could easily join to stay up to date with local tech events. And that’s why it’s called Craigslist, it started off as Craig’s personal email list. 

Pretty soon, Craigslist would grow into a strong local community of hundreds of people who suggested that Craig turn the email list into a website. And with that, Craig would whip together a simple site that let people post about local events and craigslist.org would go live in 1996. To Craig’s surprise, people would start using the site for things other than social events almost immediately. 

We’re talking job postings, recruiting, discussions, and so much more which brought in a lot more people. Despite this massive influx of users, to Craig, Craiglists was still very much just a social thing. It had made him somewhat of a legend within the Silicon Valley community, and he loved it. 

All of a sudden, he was invited to the best parties around allowing him to meet tech leaders that he had never even dreamt of meeting. But by morning time, Craig was back at his desk at Schwab as a hardcore Java engineer. It wasn’t till years later in 1999 that Craig actually started pursuing Craigslist full-time. 

In classic Craig fashion though, it was nothing flashy. He basically just rounded up 9 engineers in his apartment coded away, and it turned out that one of these engineers was a superstar: Jim Buckmaster. Jim had a very odd background as he had basically spent his entire adult life at college. He didn’t have a bunch of degrees to show for it though. 

Jim was actually a medical student at the University of Michigan but he had stopped seriously pursuing that by 1986. However, he would spend the next 10 years at college just taking one class per semester while doing odd jobs so that he could keep all of his student perks. 

Eventually, he would stumble his way into California at which point he would post his resume on Craigslist in hopes of finding a job. And it just so happened that Craig himself would hire him. Truly quite an odd backstory, but don’t let that fool you. Jim was an absolute beast. 

In fact, he was the guy who took Craig’s hobby website and turned it into a serious business. He created a robust search engine, added discussion forums, developed flagging features, designed the home page, and most importantly led nationwide expansion. 

Seeing this rising superstar, Craig would give Jim the reigns to the company and promote him to CEO in November of 2000, a position that he’s held ever since. Over the next couple of years, Craigslist would grow a massive nationwide presence but there was still one major issue: the company didn’t make any money. 


HUMBLE DOMINANCE

In 2004, Craigslist began charging users of certain categories for the first time. Craig very much wanted the website to stay a free community resource, so he mainly started monetizing users with profit incentives. 

For example, users who were posting job openings or apartment listings. They started charging $75 per job listing in San Francisco and $25 per job listing in other leading American cities. They also charged $10 per apartment listing in New York City. Many users started fearing that this was the beginning of the end for Craiglist: its slow descent into in maximizing profits. 

And honestly, if that’s the direction that Craig took it, I don’t think anybody could really blame him. He had created a massive marketplace connecting hundreds of millions of people, so wanting to monetize such a community is only natural. Not to mention, he had a bunch of pressure to do so as well. 

After Craigslist started charging for postings, eBay decided to get involved. They would purchase a 25% stake in Craigslist from ex-employees, hoping that Craigslist was gonna double down on monetization. But, Craig never went down this path which really pissed off eBay. 

In fact, eBay would actually end up suing Craigslist for not doing right by their shareholders and not focusing on revenue and profit growth. But after years in court, eBay just gave up and sold its stake back to Craigslist in 2015. And to this day, select job and apartment listings are the only way that Craigslist makes any money. 

That’s why they don’t even cross the billion-dollar mark in revenue despite having a quarter billion monthly active users. That isn’t to say that Craigslist isn’t lucrative though. While they may have an insanely high top line, they do have an insanely high bottom line given that they run an extremely lean operation. 

With only a few dozen employees, Craiglist is often able to boast net margins of 70-80%. So not too surprising that Craig has crossed the billion-dollar mark over the years. And most of his employees are quite well off as well. 

As such, Craig has largely stepped back from his role at Craiglist and has mainly been focusing on philanthropy for quite some time now. In fact, it’s not uncommon for him to donate more than $100 million in any given year. 

And most of his donations don’t go to your classic Save the African Kids or Save the Environment type efforts either. Rather, his donations are often much more nuanced. He likes supporting efforts that create a more fair and free internet, less biased journalism, greater cyber security, and more support for veterans. 

For example, if you’ve ever wondered what type of person makes large donations to websites like Wikipedia, well you’ve got your answer. But putting all that aside, I think what makes Craig truly unique is that he’s still just regular old Craig. If you saw him walking down the street, you would have no idea that he is the Craig from Craigslist. 

He was never really interested in becoming super rich or super famous or anything eccentric like that. Craigslist was just kind of something that happened by accident and he ran with it as wholesomely as he could. 

And I think this statement really captures Craig’s entire mission. “I am committed to customer service for the rest of my life... Death is my exit strategy.” And that is the insanely humbling story of Craig Newmark and Craigslist.

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