Craigslist has been around for years and seems to do pretty well for itself. While the design hasn’t changed much in all that time, the work behind the scenes has evolved steadily throughout its tenure. But if it is free to advertise on the site, how does Craigslist make money?
I see the question asked a lot online and I thought it was one worth investigating. As a regular Craigslist user myself, I too wondered how it kept going. The answer actually surprised me.
Some facts about Craigslist
Craigslist is one of the most valuable websites in the world. Founded in 1995 by San Francisco resident Craig Newmark, it has over 700 different classified sites in over 70 countries. It is valued at an estimated $5 billion and has annual revenues in excess of $381 million (2015). Craigslist is a profit making company but all revenue goes back into the company and to other worthy causes.
Newmark said he originally set up Craigslist to help people. As many users of the early internet were doing much the same thing, he thought it was a great idea. Craigslist was originally designed to list local gigs, events and rentals for locals and newcomers to San Francisco. The site grew rapidly and caused the expansion into jobs and other listings.
The company is owned by Newmark and the current CEO Jim Buckmaster. eBay used to own a quarter of Craigslist until 2015 when it gave back its share after a falling out. No other shareholders are known.
Craigslist serves 20 million page views a month, 80 million new classified ads per month and 2 million new job listings per month.
So how exactly does Craigslist make money?
Craigslist the cash cow
Craigslist is a private company so doesn’t disclose much. What we do know is taken from financial analysis and guesswork.
Craigslist doesn’t sell advertising and posting and replying to a classified is mostly free. So where does that alleged $381 million a year come from?
It charges for job listings in six major cities and apartment rentals in other cities. In San Francisco for instance, it costs $75 to list a job while in the five others it costs $25. In New York, it costs $10 to list an apartment for rent. Finally, any listings posted under ‘therapeutic services’ incurs a flat 10 buck fee.
From this income alone, the company covers most of its operating expenses. Craigslist has never been interested in profit and has never actually made one. This is contrary to just about every other entity on the internet yet is reassuringly positive and keeps the original idea of being helpful front and center.
Craigslist goes a bit further to be helpful too. It actually asks its users how they would make money and what they would find acceptable to pay for. They use public forums to consult users before changing rates or adding more. This is a unique way of doing business and is refreshing in that it isn’t there to simply gouge as much cash as possible from its users like most other companies.
The Craigslist website says that the company is always open to monetizing ideas but wants to retain the character it has. It even openly solicits ideas from users in the same public forums it uses to consult with them.
Quantity not quality
Craigslist is one of the few online entities where quantity over quality works. By the sheer number of people using the site and only a few paying for the privilege, it ensures it makes enough money to stay in business. Also, by keeping overheads low, there are apparently only 30 staff, running costs are mainly restricted to technological.
This model won’t work for every company, but Craigslist has done well out of it. If even a tiny fraction of the 80 million new classified ads or 2 million new job listings per month are paying for its listing, the future for the company is secure.
Despite some controversies over illegal listings, ‘Craigslist killers’ and other nefarious acts enabled by the site, Craigslist has managed to survive and thrive.
In a corporate America where everyone is after your money, Craigslist makes for a nice change. It genuinely wants to help and offer as much as it can for free. Even the prices it does charge are reasonable and certainly a lot cheaper than using a traditional newspaper ad.
While the intent to help people rather than take their money remains, it seems Craigslist will be around for many years to come!