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12/14/2006
03:20 PM
Mitch Wagner
Mitch Wagner
Commentary
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Craigslist Flummoxes Financial Analysts

The Internet is on fire with controversy There's been some interesting discussion around Craigslist's appearance at a financial analyst conference, wherein Craigslist flummoxed the assembled pundits by saying that they don't have any plans to charge for listings (beyond the limited charges they already make). They don't plan to accept advertising support a la Google AdSense. They don't have any plans to maximize revenues. They just plan to keep

The Internet is on fire with controversy There's been some interesting discussion around Craigslist's appearance at a financial analyst conference, wherein Craigslist flummoxed the assembled pundits by saying that they don't have any plans to charge for listings (beyond the limited charges they already make).

They don't plan to accept advertising support a la Google AdSense.

They don't have any plans to maximize revenues.

They just plan to keep doing what they're doing.

Louis Hau, at Forbes.com, starts things going with a patronizing write-up of an interview with Jim Buckmaster, president and chief executive of Craigslist.com: "Craigslist President and Chief Executive Jim Buckmaster isn't nuts. He just sounds that way, particularly to anyone who thinks that the point of running a business is, you know, to make money."

He describes Buckmaster's interview with UBS analyst Craig Schachter, at the UBS Global Media & Communications Conference. What seems to freak Hau out the most is the following statement:

"Is maximizing profit not part of the equation?'' Schachter asked.

"That's definitely not part of the equation,'' Buckmaster said. "That's never been a goal ... We have been fortunate to do well by doing good, whatever phrase you want to use, by focusing only on improving the service for users.''

Craigslist's sole source of revenue is "charging $25 for job postings in six of its largest U.S. markets and $75 for job listings in San Francisco and by assessing a $10 fee for brokered apartment listings in New York City," Lau writes.

That's it. They give away all their other services. If you want to sell a house or apartment, the cost is free (so long as you own the house or apartment yourself, or the residence is outside of New York). Likewise: If you're selling your car, or your couch, or your collection of leather-bound Agatha Christie mysteries, it costs you nothing to put up a post.

Craigslist won't accept paid advertisements because they think the users aren't interested. Likewise, they're not interested in getting equity investments.

Hau concludes the column, snidely, by saying, "We now return you to your regularly scheduled reality, already in progress."

I wonder if the Louis Hau who wrote the first and last paragraph of the article has ever met the Louis Hau who wrote the middle part.

Because the middle part of the article describes a successful business.

Craigslist ranks 47th in monthly site visitors among U.S. Internet properties, and seventh in monthly page views. They keep costs down by running open source software. Staff payroll is the company's largest expense, but they only have two dozen employees.

Craigslist doesn't disclose its finances -- but if you combine those facts with the fact that Craigslist has been around 10 years, you come to the conclusion that Craigslist is making money. And I seem to recall reading the words of a wise man, who said "the point of a business is, you know, to make money." (Where'd I read that? I can't remember at the moment.... )

Craigslist isn't making as much money as they could if they sought to maximize short-term profits, but, still, they're apparently making money.

The Lau article has Attywood.com's knickers in a twist.. Attywood.com says that Craig Newmark is a "lone nut" who's destroying the American classified ads business. He seems to believe that Craigslist.org has a moral responsibility to maximize its profits. Newmark is, according to Attywood:

a man whose altruistic vision of running a business to NOT maximize profits is now threatening the livelihood of thousands of working men and women across this country, your neighbors who work at and publish your local newspaper, jobs that were once supported by the classified ads that have migrated to the most free (or low-cost) Craigslist....

I think every journalist who's a threatened victim of layoffs should be sure to send Craig Newmark and Jim Buckmaster a holiday card this year, including a family photo, and let them know how we're doing in 2006. After all, even a "lone nut" should see who his victims are.

I've been following the interesting discussion on Making Light. Blog co-author Patrick Nielsen Hayden, a New Yorker, says he can't tell if the Attywood article is intended as a joke. "By that logic, all donations to relieve any kind of human suffering should oblige the donor to additionally provide for the hypothetical lost livelihoods of people who might have stood to profit from the suffering thus relieved-usurers, drug dealers, weapons merchants, and on down," Patrick says.

In the comments thread, Daniel Martin quotes Henry Ford: "And let me say right here that I do not believe that we should make such an awful profit on our cars. A reasonable profit is right, but not too much. So it has been my policy to force the price of the car down as fast as production would permit, and give benefits to users and labourers." That was said in response to a 1916 lawsuit charging that Ford failed to maximize profits.

Teresa Nielsen Hayden notes that Attywood seems to think "the market as a zero-sum game." She adds:

What Attywood isn't seeing is the vast amount of productive economic activity made possible by Craigslist.

A personal example: last time Patrick and I had to move, instead of paying a four-figure sum to a sleazy apartment broker, and being shown all their worst properties to see if we'd say "yes" before they moved on to the decent ones, we typed our specifications and budget into Craigslist. A long list of owner-managed rentals popped up. Every one of the apartments we checked out was good. Our apartment hunt was short, nearly painless, and cost us next to nothing....

The money we saved was instead spent on housing-related stuff that actually created value.

individualfrog agrees: "The first time I found an apartment in New York, I did it with the Village Voice classifieds, and ended up spending a fortune for a pretty nice place; the second time I used Craigslist and got an OK place for much, much cheaper. It's the only reason I could stay in the city and do whatever I did, eat and buy books, make custom jeans for rich people (I got this job through Craigslist too), a whole year of adding whatever I could manage to add to NYC. (Very little, but still.)"

Meanwhile, on his blog, called the Whatever, John Scalzi writes::

I like money quite a bit myself, as most of you know, but I think from time to time it's perfectly fine not to have money be the main reason one does a thing. Craigslist was not initially designed to make tons and tons of money for Craig Newmark, as I understand it. He wanted to help people find things around San Francisco. The company's bigger now but its goal is pretty much the same, and I think its fine that the company has focused on that rather than blinging out the revenues. Presumably it's doing well enough. Unless Newmark and Buckmaster suddenly decide that what they both really need is a 300-foot yacht stocked with cocaine and supermodels, how much more do they need?

On the discussion thread for that blog post, gerrymander says: "Unfortunately, the only real story here is 'CEO hasn't learned CEO-speak.' If Buckmaster had tossed around phrases like 'focusing on core competency' and 'not diluting the brand,' all the analysts would have been happy and the reporter unsurprised."

Craig Newmark is not some kind of anti-capitalist, anti-free-market tree-hugging pinko hippie. He's participating in the free market, just as much as the head of any company does. He's running his business the way he wants to run it, the way he thinks is best for his business.

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