Craigslist’s Business Model
I’m just going to share a couple passages from this month’s WIRED article about Craigslist and its founder, Craig Newmark, but you should really read the whole thing:
“Though the company is privately held and does not respond to questions about its finances, it is evident that craigslist earns stupendous amounts of cash. One recent report, from a consulting firm that counted the paid ads, estimates that revenue could top $100 million in 2009. Should craigslist ever be sold, the price likely would run into the billions. Newmark, by these lights, is a very rich man. When anybody reminds him of this, the craigslist founder says there is nothing he would care to do with that much money, should it ever come into his hands. He already has a parking space, a hummingbird feeder, a small home with a view, and a shower with strong water pressure. What else is he supposed to want?”
It gets better:
“Newmark’s claim of almost total disinterest in wealth dovetails with the way craigslist does business. Besides offering nearly all of its features for free, it scorns advertising, refuses investment, ignores design, and does not innovate. Ordinarily, a company that showed such complete disdain for the normal rules of business would be vulnerable to competition, but craigslist has no serious rivals. The glory of the site is its size and its price. But seen from another angle, craigslist is one of the strangest monopolies in history, where customers are locked in by fees set at zero and where the ambiance of neglect is not a way to extract more profit but the expression of a worldview.
The axioms of this worldview are easy to state. “People are good and trustworthy and generally just concerned with getting through the day,” Newmark says. If most people are good and their needs are simple, all you have to do to serve them well is build a minimal infrastructure allowing them to get together and work things out for themselves. Any additional features are almost certainly superfluous and could even be damaging.”
I’m always interested in reading about business models and their perceived strengths/weaknesses. No matter how I look at it, I always come back to the same conclusion: businesses that succeed today are successful because they provide their customers value.
