The Craigslist Business Model: How does Craigslist make money?

Craigslist has been around for a long time for anyone looking to find classified ads online.

Craigslist: Company Profile

Let’s look in depth at Craigslist and how does Craigslist make money.

What is Craigslist?

Craigslist is a free classified ads website that has sections related to jobs, housing, items for sale, services, gigs, etc. The layout and look of this site is similar to the newspaper classifieds.

The business model of Craigslist is making money by monetizing a small section of its listings but giving away most of the listings for free.

• Founded – 1995
• Founder – Craig Newmark
• CEO – Jim Buckmaster
• Headquarters – San Francisco, CA
• Type – Private
• Industry – Classified Advertising
• Competitors – OfferUp | Letgo | eBay | Poshmark | 5miles | ThredUp | Facebook Marketplace

How was Craigslist started?

Craigslist was started in 1995 by Craig Newmark with the following mission and vision:

• giving each other a break, getting the word out about everyday, real-world stuff.
• restoring the human voice to the Internet, in a humane, non-commercial environment.
• keeping things simple, common-sense, down-to-earth, honest, very real.
• providing an alternative to impersonal, big-media sites.
• being inclusive, giving a voice to the disenfranchised, democratizing …
• being a collection of communities with similar spirit, not a single monolithic entity

Newmark earned both his undergraduate and graduate degree from Case Western Reserve University. He worked for 17 years at IBM as a programmer and later went on to work at Charles Schwab. Newmark was a nerd in high school and felt that his lack of social skills held him back in the corporate world to some extent. After he was laid off from Charles Schwab at the age of 42, he collected his severance package and started Craigslist as a hobby in his time off.

Initially, Craigslist was started as an email list to 10 to 12 friends to inform them about interesting events in arts and technology in San Francisco. As time went on people kept emailing him asking that their email addresses be added to the list and post new categories such as apartments for sale. Craigslist became a web service in 1996.

By the end of 1997, Craigslist had hit a million views per month, it was becoming increasingly difficult for him to work full time and manage the website, despite volunteer help. So he quit his full time job and went all in, launching Craigslist formally as a company in 1999. Newmark also interviewed and hired Jim Buckmaster who had posted his resume on as a lead programmer in 1999. Buckmaster had earned his undergraduate degree at Virginia Tech and studied medicine and classics at the University of Michigan. Buckmaster was promoted to CEO in 2001, and has continued serving as the CEO of Craigslist for more than two decades.

Craigslist’s growth

Craigslist had the first mover advantage and has grown exponentially by being simple and consistent in its design and by building a sense of trust among people and by giving them a voice. Craigslist looks almost the same as it did it in the 90’s. While most new websites and apps to sell used stuff are A/B testing new functionality with data, Craigslist for the most part has not adapted.

It was designed to be fast and with the goal of providing service to customers, which it has done extremely well. Craigslist is known for the freshness of the classified ads displayed on its website and the absence of banner ads. Even after he was approached in 1997 with the opportunity to run banner ads, Newmark decided in favor of the user experience rather than in favor of displaying ads.

Craigslist has a loyal customer base that it caters to, and has managed to remain simple but functional. Craigslist is built on the premise that providing good service is a good business strategy, which has worked out well for Craigslist so far. They consider themselves as community service providers first and as a for profit next. . The vision for the company is shared by both Newmark and Buckmaster, who have not taken the company public. Craigslist remains a privately held company with the goal of improving connections rather than making money.

The company has grown by leaps and bounds with more than 50 billion page views a month.

Craigslist’s Statistics

• Craiglist’s users: Craigslist has at least 60 million users in the US, and gets about 50 billion page views every month with more than 100 million classified ads are posted on Craigslist each month

• Countries Craigslist serves: Craigslist serves 700 cities in 70 countries and supports 7 languages.
• Craigslist’s Employees: Craigslist has 50 employees. Craigslist’s corporate structure is intentionally small and is based on a concept in psychology proposed by British anthropologist Robin Dunbar called the Dunbar’s number. Dunbar suggested that there’s a cognitive limit to the number of people that one can maintain stable social relationships. This number ranges from 100 to 150, with 150 being the often used value.
• Ads posted on Craigslist: There are an average of 100 million ads posted on Craigslist per month.
• Craigslist’s Revenues: Craigslist posted revenues of over $1 billion in 2018. However, revenues of Craigslist in 2019 declined to $760 million, a 27% drop, mostly because of 37% decline in paid job ads.

How does Craigslist make money?

Let’s now look at how does Craigslist make money. For the most part, Craigslist is free to use for buyers and sellers. It allows users to post online Classified ads completely free of charge. It does not sell user data to third parties. Craigslist does not have any sales or marketing function and because of its low operating costs, it has close to 90% profit margins. So how does Craigslist make money and what is Craigslist’s business model?

Craigslist makes money by monetizing a small section of its listings. The categories it charges for and the fees charged are given below. These are the flat fees for online ads on Craigslist and represent the revenues of Craigslist.

• Job postings in US and selected CA areas—$10-75 (fee varies by area)
• Apartment rentals in Boston, Chicago, and NYC areas—$5
• Commercial real estate in the US—$5
• All for sale by-dealer categories in the US—$3-5
• Cars/trucks by-dealer in the US, Vancouver BC—$5
• Furniture by-dealer in Vancouver BC—$3
• Cars/trucks, RVs, and motorcycles by-owner in the US—$5
• Gigs in US and selected CA areas—$3-10
• Services in US and CA—$5

Final Thoughts

We reviewed Craigslist’s profile and looked into how does Craigslist make money. Craigslist has a great operating model. It has kept its operating costs low and has built a successful business over the years. However, it has had its fair share of controversies. Around 128 murders have happened as a result of contacting someone on the site and several unsuspecting users have been the target of scams. There’s much to be done in the way of safety when it comes to Craigslist, but there’s no denying that it is a pioneer in the world of classified advertising.