|Silicon Alley Insider has pegged the value of Craiglist at $5 billion. Presumably, that would require Craigslist to work on “maximizing its own profits," a concept that it currently disdains.|
Craig (of the List) Looks Beyond the Web
May 12, 2008
By NOAM COHEN
Imagine what it might have been like to be Dr. Kleenex. You invent a modern miracle, the cheap paper handkerchief, and suddenly you become the person blamed for America’s disposable culture, praised for a more convenient life, or both.
There never was a Dr. Kleenex, though — the product was created by a team of researchers at Kimberly-Clark laboratories in the 1920s. But there is a real Craig in Craigslist, and lately he is looking at life beyond his little list that happens to be the seventh-most-popular Web site in the United States.
It is also a site that is deeply tied up with the fate of newspapers — indeed, many in the newspaper industry blame the site’s founder, Craig Newmark, for the downturn in their classified-advertising business.
An ardently no-frills, ad-free, user-sensitive site, Craigslist has, by the estimate of its chief executive, Jim Buckmaster, generated more than 600 million free classified listings. (Though nearly all listings remain free, Craigslist has added modest fees for job listings and real estate brokers in certain big cities, and from those fees the company generates $80 million to $100 million in annual revenue. It has a staff of 25, including Mr. Newmark.)
In the United States and beyond, Craigslist is digging even deeper into the classified-ad markets. Once, an announcement that Craigslist was expanding meant adding cities like Miami, Minneapolis and Philadelphia. These days, it means smaller places like Janesville, Wis., (population: about 60,000) and Farmington, N.M., (roughly 38,000) as well as Cebu in the Philippines and, by Mr. Newmark’s request, a site for Ramallah on the West Bank.
In the face of this expansion, Mr. Newmark is becoming more of a public figure, capitalizing on his success to promote causes that include supporting the Barack Obama campaign and financing investigative journalism — not, he insists, to compensate for any damage Craigslist has done to the newspaper business, which he calls “an urban myth.”
Sitting in a coffee shop in San Francisco a month ago, explaining his plans in neat mathematical style, Mr. Newmark presented an unassuming public presence. He was perched on an ordinary seat, a six-year-old Prius parked nearby, a Kangol beret on his balding head.
He used to spend two-thirds of his time working on customer service issues (including notifying an Internet service provider about a scammer on the site), he said, and the remaining third on “founder issues,” a catchall term he uses for his public-spirited work. That division, he said, would now be half and half.
But before he can extricate himself from customer issues, Mr. Newmark will have to resolve some of the growing business and legal complexities that surround Craigslist, a laid-back operation that is bumping into tough-minded competitors.
A Delaware lawsuit accuses him and Mr. Buckmaster of boardroom chicanery, an assertion they emphatically deny. Their accuser is the online giant eBay, which became a minority shareholder in 2004, with a stake of roughly 28 percent.
And while officials at Craigslist, including Mr. Newmark, maintain that for many years he has not had a significant leadership role there, the eBay lawsuit describes Mr. Newmark, in addition to being a large shareholder, as chairman (the board has two members; it had been three).
The suit was set in motion by eBay’s decision to introduce a rival online-classified site, Kijiji, in the United States last year. Kijiji is already the market leader in Canada, Germany, Italy and Taiwan.
EBay’s complaint contends that after the Kijiji move, Mr. Newmark and Mr. Buckmaster plotted in secret to dilute eBay’s influence in the company, including an effort to deprive it of its board seat. The lawsuit asks the court to reverse those provisions.
Craigslist is expected to respond to the complaint this month, but on its blog it offered an assessment: “Sadly, we have an uncomfortably conflicted shareholder in our midst, one that is obsessed with dominating online classifieds for the purpose of maximizing its own profits.”
The phrase “maximizing its own profits” broadly outlines the fight between the two companies.
Despite its success, Craigslist prides itself on its grass-roots instincts and user-based content — including harnessing its users to identify and block bad actors on the site. Even broad strategic decisions, such as which areas to expand into, are described as reflecting user requests made at online forums at the site.
As the complaint indicated, last year Mr. Buckmaster wrote to Meg Whitman, then the chief executive of eBay, saying, “We are no longer comfortable having eBay as a shareholder, and wish to explore options for our repurchase, or for otherwise finding a new home for these shares.”
In an e-mail message of its own, eBay stressed that the two companies would remain joined. “We would obviously prefer to see this resolved without litigation,” eBay wrote. “With that said, we will only accept a resolution that preserves our rights and the full value of our investment in Craigslist. We will continue to act openly and in good faith as a minority shareholder.”
The competition between the companies is also heating up outside court. EBay has recently sent e-mail messages to its users promoting Kijiji, and Craigslist in the last few weeks has added 120 cities, half of them overseas, where Kijiji has been dominant.
The Web sites’ expansion comes as newspapers are experiencing a steep downturn in classified advertising, magnified by the badly depressed housing market and weaker overall economy. Print classified advertising declined 16 percent last year, to $14.2 billion, according to the Newspaper Association of America, below the 1996 level, even without adjusting for inflation.
In this straitened market, Craigslist becomes shorthand for the threat that online advertising outlets are seen as posing to newspapers.
Mr. Buckmaster responds, saying that Craigslist has no sales force and has not sought to win over newspaper advertisers, in contrast to companies like the job-listing site Monster. “That to me is a direct attack on newspapers,” he said. “We put a service out there.”
“There are bigger things that have been more problematic for newspapers,” he added, including circulation losses and basic mismanagement. “Newspapers have an enormous amount of debt. That is not something that can be laid at our doorstep.”
Clayton Frink is the publisher of The Capital Times in Madison, Wis., where Craigslist arrived in 2005. The newspaper late last month stopped printing daily, adopting a Web strategy and printing weekly.
“They have ads we would have had once upon a time,” he said, but added that his staff did not consider it “No. 1 or No. 2 or 3 of Web sites that hurt our business.” The bigger enemy, he said, is the changing marketplace, noting that large employers used to buy a page and a half for job listings and “now they put in a small ad saying to see their Web site.”
“What Craigslist does well is build a community and a feel of a community,” he said. “Building communities is going to be critical for any online product, whether a newspaper or not.”
Also, Craigslist no longer sneaks up on local newspapers. Sammy Lopez, publisher of The Daily Times in Farmington, said: “We’ve been kind of watching them. You can get on Craigslist and see if people have been requesting a site. I asked someone to look at that four or five months ago, and saw that they had.”
He said the knowledge that Craigslist would be arriving someday led the paper to improve its online presentation of classified ads, creating more categories and clear entry points. He noted that a vibrant classified-ad section was both a revenue source and a reason that people buy the paper and visit the Web site.
Mr. Newmark is a believer in the power of technology to improve life — whether in the blogging he does for Mr. Obama, a visit he recently made to Israel where he argued in favor of microloans and technological innovation to build up the Palestinian economy, or the use of online tools to make government more transparent.
He promotes these projects on his personal blog. As of the last couple of weeks, he has been writing posts on Twitter.com, too.
The list of good-government and good-journalism Web sites Mr. Newmark is involved with — sometimes financially, but more often as adviser and advocate in the Silicon Valley world — speak for themselves: factcheck.org, sunlightfoundation.com, PRWatch.org, NewsTrust.net, publicintegrity.org.
An article in The Observer of London two years ago described him as “readying his armory of cash to invest in citizen journalism projects.” Mr. Newmark says he never donated more than $20,000 to any organization.
But he has not followed the common path to Silicon Valley philanthropy — create a successful Web site, sell the Web site either to a larger company or through an initial public offering, acquire a pile of cash, then give away part of that.
While unwilling to discuss his wealth, he said he could be a lot richer if he wanted to. “We know these guys in Google and the eBay guys,“ he said, “and they are not any happier than anyone else. A lot of money is a burden.”
Copyright 2008 The New York Times Company