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Craigslist: A Triumph Of Nerd Values

September 7, 2008

The founders of the popular – and controversial – classified advertising website have built a $5 billion giant without selling out

Craig Newmark oversees a classified advertising website that spans the globe and is used by tens of millions of people every day. He drives a scruffy seven-year-old Toyota Prius and he goes to work only a couple of days a week.

Jim Buckmaster is his business partner, responsible for the day-to-day running of an organisation that Wall Street estimates is worth about $5 billion (€3.5 billion).

He lives in a modest, rented apartment not far from the company’s global headquarters, a rickety 19th century house tucked between a pizza restaurant and a junk shop in San Francisco.

Even by the laid back standards of the Californian city’s sandal-wearing, Frisbee-tossing dotcom industry, the duo behind Craigslist could be considered a little odd.

In the flesh, however, this odd couple of self-proclaimed nerds seem as American as apple pie. Newmark, 55, is short, stocky, bald and wears glasses. Buckmaster, 46, is tall and slim, with lustrous brown hair and the good looks of a mature model. As befits liberal San Francisco tech entrepreneurs, both have goatees.

They have harnessed the collective power of America’s geeks to turn a classified listings for West Coast software developers into an internet phenomenon servicing more than 500 cities in more than 50 countries. And they have done it without sacrificing what Newmark calls their “nerd values”.

Visiting a Craigslist website today is like travelling back in time more than a decade, to the internet that existed before Face-book, YouTube or Amazon. There are no sleek graphics, no fancy animations - and definitely no irritating corporate banners or pop-up adverts. All you’ll find are millions upon millions of personal, classified adverts.

On Craigslist you can buy or sell physical objects as large as houses or as small as stamps. You can find personal services as useful as plumbers or as illicit as prostitutes. You can find a husband or divorce a wife.

As the company continues to expand, Newmark and Buckmaster still exude a parental excitement about the breadth of the Craigslist community. And they are still amazed at some of the things that people offer on the site.

“How about a dead moose?” Buckmaster asks. “Apparently it’s a big issue in Alaska. There are a lot of moose running around up there and they’re huge animals. If one dies in your yard, it’s a real problem. There’s no state agency that will come and take them away. So if you’re in the market for a dead moose, now you know where to look.”

Unlike auction sites such as eBay, Craigslist doesn’t charge a fee for posting 99.9% of its listings, and it doesn’t take a cut of successful transactions or encounters. The only fees that Craigslist charges - and thus the only money the company makes – are from job listings that employers post in a few American cities, and from rental listings posted by property agencies in New York. And those charges were imposed not as a way of making money for Craigslist but to regulate previously unruly areas of the site and make them more useful for users.

At the heart of Craigslist’s “nerd values”, then, is the duo’s refusal to maximise profits. Analysts on Wall Street who have studied the company believe that Craigslist, which has annual revenues of about $100m, could earn half a billion dollars a year without breaking a sweat, simply by running banner advertising and charging for more listings.

However, Newmark and Buckmaster won’t do that, and Wall Street doesn’t know what to make of people who turn down that kind of money. Competitors such as eBay , which see Craigslist’s classified market as a huge untapped source of revenue, can’t get their head around such sentiments either.

They cry foul because they can’t work out how to compete against a company that won’t charge for its services.

Craigslist remains the market leader — the 11th most-visited website in the US and more popular than Amazon or CNN. EBay tried setting up a rival service called Kijiji but has yet to make inroads into Craigslist’s almost total domination of the classified ads business.

Frustrated, eBay managed to acquire a 28% shareholding in Craigslist from an early employee, before launching rival sites in foreign countries — it took over Gumtree in the UK, for example.

Craigslist now sees eBay as an unwanted corporate cuckoo in its counterculture nest and wants to push it out, a battle that has ended up in the courts.

Buckmaster and Newmark remain convinced that Craigslist’s insistence on putting the needs of the user above profit and growth is the reason for their success and comparative longevity.

Buckmaster points out that Craigslist survived the dotcom bust while many better capitalised companies didn’t.

“We could have had as much venture capital money as we wanted and could easily have gone public,” he says. “But we liked what we were doing and we weren’t interested in trading it away for money. As soon as you take venture capital money, you’ve sealed your fate. You will either need to sell the company to another company or you will need to go public.

“And as we all found out, almost every one of those thousand-plus companies which did that was wrong and we were right. We made a bunch of decisions that have enabled us to remain a small company, which we like.”

Small indeed. Despite its near-global reach, Craigslist has just 25 staff, and that includes its two bosses. Compare that with eBay, which boasts some 15,000 employees.

Beyond keeping Craigslist lean and unbureaucratic, Newmark and Buckmaster are extremely wary of how too much money might change their venture’s nerd-value culture. They sit across a tiny room from each other in their San Francisco office, files scattered about the floor.

“I’ve seen companies with too much revenue,” says Newmark. “Having too much money, too many resources, means you don’t have to work smart, so you work dumb. And then you lose your market position to smaller, hungrier competitors. Also, when you have too much cash and power, you tend to attract employees who are very good at organisational politics but who are really bad at everything else.”

Another key nerd value is that the site’s millions of users know better than Craigslist what they want. This means that Craigslist opens sites in new cities and adds new features only when users demand them.

Most importantly, users themselves regulate the site, flagging listings that they believe to be scams or illegal. Craigslist’s founders say that this is far more effective than if they tried to regulate the site themselves, and much cheaper, obviously.

Such a laissez-faire attitude has inevitably led to Craigslist being used by criminals as well as honest bargain hunters and lonely hearts. In 2007 a Minneapolis woman pleaded guilty to running an underage prostitution ring using Craigslist’s personal ads, while in February a woman from Michigan was charged with using Craigslist to hire a contract killer to murder a rival in love.

Some critics also complain that by refusing to charge for its services, Craigslist is undercutting the classified advertising in local and national newspapers, undermining the financial structure of the newspaper business. They say that it is damaging an essential element of democracy: the ability of the fourth estate to investigate government and big business.

“Craigslist makes a convenient bogeyman for media companies that are sinking in debt,” sniffs Buckmaster, an avid reader of Noam Chomsky’s Manufacturing Consent, a fierce critique of mainstream media.

“Big companies become risk-averse and are not willing to alienate power structures by calling a spade a spade, hence the...

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