Saturday, May 06, 2006

Craigslist - The Power of Word of Mouth

Craigslist carries no corporate adverts on its site, there is no fee for registration, and most users would never know that it charges for anything. The company makes all its money by charging employers in three cities a fee for listing jobs: $75 in San Francisco, $25 in New York and Los Angeles. They even feel uncomfortable with this: Buckmaster is quick to justify the charge by saying it improves the level of jobs offered, and so improves the service Craigslist offers.

The company employs just 20 people, spends no money on ads, relying on word of mouth, and has been profitable since 1999. Craigslist doesn’t disclose how much money it makes, but industry estimates put 2005 revenues around $20m, and costs at no more than $5m. The site’s devoted users provide all the content for free.

It’s a business that has Silicon Valley venture capitalists and Wall Street bankers salivating. With its huge and loyal customer base expanding rapidly, so much more money could be made by adding adverts or by charging fees for other parts of the site. Every large media organisation has run the rule over Craigslist. Plenty have offered cash. They have all had the same reply: “No.”

(Craig) Newmark drives a Prius, a petrol-saving hybrid car. Buckmaster has never owned a car. They both take the bus to work in the morning. “I don’t really want a Rolls-Royce or a huge, fancy house,” says Buckmaster. “Money is important until you have enough of it to be comfortable with. Beyond that, I think it’s a very mixed bag.”

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