Craigslist's Ongoing Success Story

CEO Jim Buckmaster has an unusual business approach for the popular classified ads site: Keep it simple and don't try to maximize revenue CEO Jim Buckmaster has been called many things: anti-establishment, a communist, and a socialistic anarchist. Traditional businesspeople are often confounded by the company's business model. After all, the online classified advertisement site over which he presides consistently ranks among the Internet's most trafficked sites, yet he remains decidedly uninterested in monetization.

A few things you should know about Craigslist. It serves classified ads to 450 cities. The site receives more than 750,000 job listings a month, and users self-publish about 14 million new classifieds a month. Buckmaster confirms the site has been profitable since late 1999, and it generates revenues by charging nominal fees for job posts in seven cities and for broker's apartment listings in New York. No user fees. No banner ads. Analysts estimate the site took in $25 million in revenues last year, but it's clear that that the site could be worth more—very much more.

How has the site created such a dedicated online community? And what has it learned about how to listen to that community? On May 5, Buckmaster sat down with BusinessWeek innovation editor Jessi Hempel for a fireside chat at the Nantucket Conference, an annual gathering of New England venture capitalists and entrepreneurs. Edited excerpts from their conversation follow:

Why aren't you doing more to monetize the site?

We've been told by salespeople that we could bring in many millions of dollars by adding text ads but our users aren't asking us for text ads so we don't have them. Paid search can create a conflict of interest with site search. The better your site search is, the less need there is for paid search.

How have you built such a dedicated community of users?

Something we learned early on is the more we can get out of the way and let users do things for themselves, the less you have to depend on someone in an office. Users are better positioned than staff to serve themselves and help each other. The other thing is following up on feedback. The site has been hammered into shape by millions of requests over 12 years. Everything you see there today is the result of user feedback.

The site looks very much the same as it did in the late 1990s, even as you've added more cities and categories. It's text heavy and kind of boring. Have you ever considered a redesign?

People have suggested that, but they're usually Web designers. You might look to a boring interface as a reassuring thing to cling to as you're looking at some of the outlandish things you see out there. We're open to letting people use HTML in their postings, almost to a fault. People aren't looking for the interface to be exciting. They're looking to it to be fast, reliable, and easy to use.

How do you prevent inappropriate postings from creeping on to the site?

We're approaching 20 million new classifieds per month. The answer [to inappropriate material] has been to let users flag something that's inappropriate. If enough users flag it, it comes down automatically. Inappropriate ads usually come down within a few minutes. It's not perfect, but it's far more effective than a centralized staff could do.

You just had a victory in a lawsuit that has some important implications for free speech on the Web. Can you explain?

A group of attorneys in Chicago filed a suit, trying to take us to task over a small number of postings they thought ran afoul of fair housing laws. Mostly they wouldn't strike you as inappropriate. For example, the mention of a church in an ad was said to be discriminatory to people of a particular faith. That suit was dismissed. The group was attacking the law that insulates online service providers from being held responsible for content posted by users. If there wasn't that law, a lot of sites like MySpace couldn't function.

Not to harp on it, Jim, but aren't you interested in making just a little bit more money?

This is where the descriptions like 'communist' and 'anarchist' come in. It seems to make no sense to let a site be as useful as possible and pay no attention to the monetary side. But [generating more revenues] hasn't been tempting. We enjoy working at Craigslist. Users like it, and we're not sure what we would do with a big surplus of cash. We'd probably look at ways to give it away.

Arguably, like (GOOG) or some other large business-funded charities, you could make a big impact on the world, no?

We give away at least 1% of revenue, but we haven't had a chorus of users suggesting that we should run ads to generate funds for charity. People have that money now, and they can give it away. We're not in a position to be an arbiter of where that money should go.

Simplicity has emerged as a big theme in business. How does it apply to your work?

We're in the top 10 companies in traffic with a staff of 24, whereas the other companies on that list have staffs of more than 10,000. Early in the Internet boom, you tried to raise a lot of VC money and invest in esoteric hardware and expensive software. That never appealed to us. We invested in open source software from the beginning.

We don't have sales and marketing. We mainly have engineers. We don't have meetings. We're not trying to maximize revenue. When you're not trying to maximize revenue, it's surprising how little staff you need.

Question time from the audience also threw up some interesting topics.

How about cranking it up a little bit? If you went from 24 employees to 50 you could provide better services.

We are planning to hire more tech staff and customer-service staff. But we're not constrained by capital now, so it's not necessary for us to look for ways to make more money in order to hire people. We're not looking to become a midsized company. We're happy being a small company.

What can entrepreneurial firms learn from you?

We don't have meetings. People can work from wherever they are whenever they want. The tech team is managed on the alpha geek principle. We're fortunate to have some fairly brilliant technical people. The one aspect of Craigslist that's behind the scenes is how we manage to run a rapidly growing site with page load times that are among the fastest of any company. Open source is a big part of it.

Are you worried about competition, especially internationally?

We don't even look at what other companies are doing. We're not setting out to conquer the world or achieve any particular market share. We're just following up on what our users want us to do. We've got plenty of things to occupy our thoughts about how to do better by our users. That crowds out thoughts of fighting competition.

Internationally, there are a lot of companies that have copied our model years before we got there. As long as they're providing the good things that Craigslist tries to provide, we don't have a problem with that. We try to be there in the background as an insurance policy in case they decide to turn the screws on their customers.

If you were running a newspaper, what would you do? Newspapers don't like you so much.

To me, a newspaper's role is to get high-quality, accurate information in front of readers. Long before I got to Craigslist, I felt that the big newspaper chains had gotten away from that by taking on debt for acquisitions and focusing on how to increase their profit margins. If it was me, I'd try to get back to the principles of how do I serve the role of the Fourth Estate well and keep the U.S. from falling into this ridiculous war that we're in.

I was very disappointed with how newspapers dropped the ball in avoiding our getting into this war. I love newspapers and I read lots of them, but once you get away from what you're about, it becomes difficult. You can't serve Wall Street while you're also trying to assist the public. If I were to choose, I'd try to serve the public and let the money side take care of itself.

If your users decided they liked another site better and trickled away, would that be O.K?

If we're so inept that we couldn't provide a value proposition that users found important, yeah, I'd probably encourage them to go away.

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