A Stroll Through the Craigslist-Crusher Startup Graveyard
amandapeyton.com
amandapeyton.com
* Craigslist’s operating expenses are ridiculously low in relation to its huge size, allowing it to offer most services for free and still earn a profit. According to its public fact sheet, every month the site receives more than 50 million classified ads and serves more than 30 billion web pages.[1] Alexa ranks it as the ninth most-trafficked site in the US.[2] Yet somehow, the company manages to do this with just over 30 employees![1] On a per-year basis, that’s around 20 million classifieds per employee! Infrastructure costs are also very, very low in relation to traffic, as the site’s design, functionality, and interface are all ridiculously light and bare-bones.[3] No startup can match such ultra-low per-classified costs.
* While Craigstlist is technically a for-profit corporation, it operates as a non-profit organization,[1] so it is not seeking to maximize profits; instead, it is seeking only to be financially sustainable. Wealth-seeking entrepreneurs are at a huge disadvantage if they try to compete against a well-established entity that has both an ultra-low-cost advantage and no desire to acquire wealth over time.
In short, Craigslist possesses what Warren Buffett calls the “low-cost producer” advantage: it can offer a commodity service for less than anyone else.[4]
[1] http://www.craigslist.org/about/factsheet
[2] http://www.alexa.com/topsites/countries/US
[3] According to this 2011 presentation, Craiglist, the 9th most-traffic site in the US, is powered by only ~500 servers located in two data centers: http://www.slideshare.net/jzawodn/lessons-learned-migrating-...
[4] For example, read Buffett's description of GEICO’s competitive advantage in his 2000 letter to shareholders: http://www.berkshirehathaway.com/2000ar/2000letter.html
Q: Is craigslist a nonprofit? A: No, craigslist was incorporated as a for-profit in 1999.
Q: Why does craigslist still use a ".org" domain? A: It symbolizes the relatively non-commercial nature, public service mission, and non-corporate culture of craigslist.
I updated my comment to reflect this. Thank you for pointing it out!
You shouldn't take a company's PR at face value.
Source? And are those the company's profits, or what the founder, Craig Newmark, has taken out of the company's profits since its founding 17-18 years ago? Does that include his salary, or only his pro-rata share of distributions to all shareholders, or both?
Let's assume for a moment that this is the total amount of money he's received from the company since inception. It's a relatively paltry amount of money for a company with that kind of reach. Compare the "$30 million" you say he has earned cumulatively over nearly two decades to the billions or hundreds of millions of dollars earned by the founders of most web companies that have achieved similar scale.
Moreover, that figure is comparable to what CEOs of large non-profit organizations make per year. Compare $30 million over 17-18 years, or around $1.7 million per year, to the figures quoted in this article: http://www.bizjournals.com/dallas/blog/2011/09/slideshow-who...
By all accounts, Craigslist behaves a lot more like a non-profit organization than as a for-profit corporation.
Craigslist occupies what should be one of the most lucrative pieces of real estate on the entire Internet. With numbers like that, you're making the parent commenter's point for them.
Craigslist not only has a low-cost producer advantage, it serves a vast, vast market of people who only want to consume its commodified services at this nearly-zero cost. And who now expect such low-cost services to exist.
The article said: If you are trying to compete with Craigslist in any of the above listed categories, you have to make life amazing for the seller. If that means driving a truck around “buying” couches and bookshelves and iphones for a year, consider it the cost of user acquisition.
Lol. Yeah, that's what you'd have to do. Somehow stand between multi-billion-dollar river of buyers on craigslist and similar multi-billion-dollar river of sellers and somehow re-route the results. And that would cost unlimited amount of money once people figured out they could take couches from the dump and sell them to you!
I don't know why it took off so strongly here in Canada but the speed at which it did surprised even me. I have also been surprised it hasn't done the same in the US since it's not that culturally different when it comes to online classifieds.
For the US equivalent, it looks like someone thought it was a good idea to use an unreadable graphic as its interface.
Looks like they've dropped the separate branding, at least in the US.
- realtor.com - zillow.com - trulia.com
Realtor.com is a giant commercial realty sales site that just happens to list rentals. The interfaces to the above sites aren't utterly terrible, but they're certainly not great (i.e., not lightning fast, crowded with extraneous material, etc.).
The rental listings still pale in comparison to CL, but they've got much bigger pots on the stove. Who knows, one day they may decide to split off a sub-site to handle traditional residential, commercial, short-term and non-traditional rental properties.
They're quite innovative and open actually. They actively ask for feedback, release beta applications and statistics, and release new and useful features all the time. Most people, geeks included, actually likes them.
Norwegians (and other Europeans) usually envy the US for being the first to get a lot of web services (we still can't rent movies online like Netflix), but Craiglist is one of the few things I don't exactly envy you for. Pity would probably be a better description.
I'm so used to typing sfbay.craigslist.org, and just search that I don't even think about it. Textual list works great for me for most part. If I'm interested, I send an email, get a response. Done!!
Why do people think that putting a lipstick on a pig will make it more appealing when all I want is some pork.
Regarding scammers: there will be scammers in every alternate, at least thats what I think. It is my job to do the due diligence and take care.
Stop trying to fix what ain't broke.
Have you ever used Craiglist to rent an apartment or to buy a used car?
I agree that it would be awesome to be able to filter listings on Craiglist through a neat-o UI mechanism ("Hipmunk for apartments maybe").
In fact, I basically spent the entire time I was using the site thinking "if only more landlords indicated whether the apartment is pet-friendly...". I ended up calling a ton of landlords just to find out whether they allowed pets, on the off chance that some of those who had listed no pet policy actually allowed them.
But is that really a UI problem? For me, Craigslist has already provided the UI tools I needed (you can search by pet-friendliness). The problem was that the landlords didn't include that information in their listings in the first place.
Craigslist is a site for "classified ads". Traditional classifieds (in newspapers) were usually very short, just a few words. Of course far more is possible with Craigslist, but a larger ad also requires more effort on the part of the seller.
As it is now, incomplete information has a cost for sellers (people skip their ads), but they can choose to bear that cost if they wish, presumably after comparing it against the cost of providing more complete information. Part of the reason people use Craigslist is that it is more or less a willy-nilly market that is friendly to small sellers.
So what would Craigslist have to do to make a new UI worthwhile (for me)? Enforce data completeness on the sellers. But that would turn people off. Requiring additional bookkeeping or punishing sellers for "incomplete" listings just to make a snappy UI practical would harm the community and the site.
There's clearly zero quality control. The user experience for apartment-hunting is HORRIBLE.
That's the beauty of its UI, the fact that's it's not so appealing puts some people off but also rewards those working hard at it. The amount and variety of offered appartements on CL is huge and much better than what most other sites would offer. That makes for an experience whose reward can be very high and this is valuable when looking for a place to live.
Right... why would you want to only reward your users who work hard? That's idiotic.
Why wouldn't you want to make the site easy to use, with high-quality data, for everyone? When that really wouldn't be that hard to do.
When I was apartment-hunting, over the course of weeks, I literally learned how to recognize particularly spammy brokers by the formatting of their headlines, so I wouldn't click on them... (Four asterisks at beginning and end? Ignore. All-caps with a strange abbreviation for bedroom? Ignore. Etc.) This is a skill I deeply wish I hadn't had to learn. It's ridiculous.
The market for shares / sublets / by owners is much less transparent and in a city as NY where some places are rent controlled, other have a an amazing history / layout etc, this is actually interesting.
In a sense it gives anyone a shot at being lucky and finding an amazing place with a bit of dedication. If it was fully transparent I think the challenge to achieve the same outcome would be to continuously for long periods of time, be looking for an apt. Which right now isnt necessary.
That's it. Nevertheless I'd be curious to see this done right and see the difference.
What you're describing is basically anti-market. You're saying, celebrate market friction and inefficiences, so people who are time-rich but money-poor can have a shot at finding underpriced properties, kind of like a lottery.
For me, it just means that I wasted probably 20 or 30 hours of my life sifting through listings that were 99% crappy, in order to find my apartment. I blame Craig, for not improving the efficiency of the market, which would be really easy for his site to do.
I was actually pretty disappointed because I really care about how hard it is to post to Craigslist. I think that's a huge issue right now and will be for them going forward. As more people rely on smartphones as their primary computing device (and selling device for that matter---phone, sms, camera, email, etc.), there will be more opportunity to create something that takes casual sellers away (who are also buyers, wink). Obviously at niches at first, but it's going to be a serious weakness (if an 800lb gorilla can have a serious weakness). Call me crazy, but their complete disinterest in mobile (not Mobile, AL - http://mobile.craigslist.org) is IMO their Achilles heel.
Payments, reputation, spammers--I agree that none of that matters because it introduces way too much transaction friction (and annoying things like taxable income!)
What I do care about is that fact that in 2012, people try to sell their couch without a photo, when nearly everyone on an Internet-enabled smartphone has posted a picture to Facebook/Twitter/Instagram without even thinking twice about it. That's just weird.
This was a tactic that AIRBnB used and they got some flak for it. CL doesn't like the middle-man approach.
I don't know though if AIRBnB got any C&D or other imperial entanglements due to this approach.
But at least in my experience, most people who use Craigslist wish that there were something better that had a large user base. They don't like the UI, they don't like how many scammers there are, etc. They tolerate Craigslist because that's where the results are, but they would be happy to jump ship if they could get those results elsewhere, but with more pros and fewer cons.
It seems like this would be a good case for "conditional commmitment."
Kickstarter is a great example of a service that allows conditional commitment. Here's the problem it solves: People are reluctant to donate to a cause unless they know there is enough other support to make the goal viable. Kickstarter lets them conditionally donate, and their donation is only collected once some threshold of total pledges have been reached. (Side note: A Kickstarter for politics would be a great way for a third-party candidate to make inroads, don't you think?)
In the case of a Craigslist alternative, perhaps one strategy would be to have people commit to a proposed new service -- on the condition that some threshold of other people also commit. Once the threshold is reached, boom, it's like Black Friday, with a line of people at the door waiting to rush in en masse.
In regards to Kickstarter for politics: Might work better if these were bi-partisan "internetsy" themes, i.e. ACTA, SOPA. But the problem with politics is, that there might be not immediate results.
The "moneybombs" many candidates use to drive up cash in certain timeframes could be seen as somewhat similar to Kickstarter. They are often affiliated with a specific fund rising goal, some (made up) reason for the "bomb", and often even list contributor names and messages.
Many people view CL as a the simplest solution. It has the least resistance. Regardless of its cons, people continue to use the system.
* Kajiji - popular in Canada (according to another poster)
* OLX - popular in Spain and Latin America [crunchbase]
* okcupid
* AirBnB (mentioned in post)
* StubHub
* Etsy
* Legal Zoom
* Elance
I guess you could argue that is the case with airbnb, but I don't think the transaction type is more limited than the kinds that happen in relationships.
Maybe the better comparison would be PlentyOfFish
See "positive network externalities", as mentioned here: http://news.ycombinator.com/item?id=4152078
Startups that are concentrating on different pieces of the pie and providing a better experience seem to be on the right track. AirBnb, OkCupid, and the other companies listed in the comments here. Even in the jobs space I find LinkedIn jobs having more and better listings than Craigslist.
It's easy to hate Craigslist because of stories about it "crushing" other companies. But much of Craigslist's value is in its data and that data being solely available on its website. If that data was available on competitors, then it would lose leverage. This is true for many websites out there and they go to lengths to protect that data (eg. LinkedIn shutting off its API to third-parties).
This means that anything competing with it with a goal of making money is going to have an even harder time competing with CL, which is mostly free and completely free of advertising. Look at eBay, which arguably could have been improved on quite a bit and charged users fairly high fees - nobody (that I know of) ever managed to compete with them on a large scale in the auction space.
Like others have said, I think the value is in competing on very specific areas. A few that would be possible and profitable:
- Jobs/contract work. Given the technology we have, I think the internet has done a poor job of changing the way we find and apply for employment and short-term work. I've been working on some prototypes for tech-oriented job sites, and I think there are a lot of other industries that could benefit from smarter job sites. Plus, there is a considerable amount of money in this area.
- Housing, especially in places like SF and NYC.
- Local services.
Lower-end stuff like people selling used couches and Xbox 360 games is probably not an area worth getting into.
but the more important graphic is this one - http://s3.amazonaws.com/data.tumblr.com/tumblr_kwkfi5tqEi1qz...
ill leave this here.
Amanda talks about Craigslist from the perspective of the seller (new sites have nobody to sell to).
What about the other half, the buyers? Same problem -- users on new sites have nobody to buy from.
The whole problem is the network effect. And the reason there aren't Craigslist killers is because it's insanely hard to overcome this. Your product may be 100x better, but sellers won't use it until tons of buyers do, and buyers won't use it until tons of sellers do. Craigslist didn't have this problem because it was basically the first decent online classifieds site. So now Craigslist can just sit there and not innovate.
This is why people are so upset with Craigslist, and why supposed Craisglist-killers are failing. (It makes normal product competition, like getting an app to be #1 in the iTunes store, look easy by comparison.)
Nowadays, any site that doesn't already have the same kind of buyer and seller populations that Craigslist does is at a complete and total disadvantage in competing, and the point is, it's virtually impossible to overcome that. Craig today would never get his foot in the door.
> Why should we be cheering anyone on who wants to just cheat their way into this space, piggybacking on all of that hard work and dedication building this market?
Because Craigslist's success is not due 100% to hard work and dedication. It's probably more like 10% hard work, and 90% being in the right place at the right time. So the question is, why should Craigslist be forever rewarded for dumb good luck, while competitors who work even harder to create better products are doomed to fail, because it's impossible for them to attract users while Craigslist sucks them all up, just because of its network lock-in effects?
I want to see Craigslist start to have to compete and innovate again, just like most other companies have to.
I was one of those people in 1995 schlepping around town trying to convince companies that the Internet existed, and that they wanted a website ("yes, I guess it is kind of like a brochure...").
The entrenched competitor at the time were physical newspaper classified advertisements. There were great apartment-specific guides you could get. If you were serious about apartment-hunting, the Internet would have looked stupid.
Remember, Craigslist started in 1995, and they were an email mailing list of Craig and his friends. It wasn't until 1999 that they incorporated.
Meanwhile, while their /look/ hasn't changed, their functionality has, and it has defined entire genres of things people use it for that, as someone only 30, I'm still floored by the success of (as in "people seriously want to use a website for that?!").
There actually was competition, even among friends, and the user community seriously stuck with Craig only because he had spent years making them like him (which is hard work that does not involve code, but instead service: Craigslist actually does a lot of work behind the scenes on that community, and does to this day).
The story of bootstrapping Craigslist is actually epic: please read it. There have been some amazing write ups of the story in various publications. I recommend Gibson the longest one.
But that's not my point. My point is, their bootstrapping was a challenge just like any other other startup has to gain users, but it was possible, with hard work.
Nowadays, if any other startup tries bootstrapping that is even better, with even more hard work and dedication, they'll still fail, because Craigslist wins via network effects. It's now virtually impossible.
Resentment towards Craigslist is not because they got to where they are now easily -- they didn't, it was hard. That gets respect. The resentment comes because they're staying where they are now, easily, and potentially better competitors have virtually zero chance, no matter how much they work hard.
But as long as they don't have the users, they are not better.
And don't forget that recent history is filled with companies that were "virtually impossible to defeat" until they were beaten, and harshly.
That's a truism. Crazygringo's point assumes that network effects are excluded from the measure of a "better" service. I think that's a fair basis for comparison, since the network effective advantage accrues from an earlier period in the marketplace's history: it's the prize won by being better/smarter than previous competitors. But it says nothing about the dominant service being better than current, newly launched competitors.
If you define "better" as having more users, then that's pretty much ex post facto reasoning and tells us little.
> And don't forget that recent history is filled with companies that were "virtually impossible to defeat" until they were beaten, and harshly.
1. The number of years that a company dominates is the measure of how much that company has won. The fact that a company eventually falls to a competitor doesn't mean that the company didn't profit handsomely for years or decades.
2. The fact that some large companies have fallen doesn't mean that the existing behemoths don't derive most of their advantage from network effects. Maybe we would have seen better, more open social networking startups emerge and win the market by now if Facebook's network effects were somehow nullified.
The ultimate point is that network effects are a very significant barrier to entry, and mitigating them would allow a more dynamic market for startups to compete in, and higher competition in the market (which is better for consumers). Imagine if all social networks were interoperable and people could choose which service they wanted to live on -- then there wouldn't be a tendency for a 1000-ton gorilla to emerge at the top of the heap.
(Funnily, I have nothing against Craigslist, since they're providing a very useful service at virtually no cost. They deserve their position, easily; their market's story is a happy one. Let's hope it happens in more places soon.)
Regarding network effects the point is that they do make the service more useful (read better) for the users, and in a significant way, many times more significant than a new UI. So, Craiglist's still better now, if only because they were better before. Unfair? Maybe so, but complaining won't solve the problem or make it go away. It's just that we've been spoiled about never having big barriers to entry anymore.
Regarding falling companies was just to counter the parent saying that that kind of companies are unassailable, when they clearly aren't. Nothing more, nothing less... profits or their staying alive being due to network effects are irrelevant to my point.
The ultimate point is that just bitterly complaining about how unfair Craiglist is because it's using its competitive advantages to its advantage will not solve the barrier to entry problem, it doesn't even make it clear why is it a problem, nor posits arguments about what to do (if anything) with it.
In fact, the major difference between 1995 and now is that CL has concentrated the market from zillions of local print publications to a single website. That means they are more vulnerable in some ways than "print classifieds" were in 1995. (It also means they have to stay on their toes to make sure they keep their users happy.)
>> It's now virtually impossible.
Air BnB shows that it can be done, so we know that it's not impossible to build a challenger. And we knew that it would be virtually impossible, or everyone would do it.
I've seen a bunch of my friends use Facebook as a "pre-craigslist" as in "if none of my friends want it first, I'm going to CL this TV"
I would feel much more comfortable buying something through a friend or a friend-of-a-friend. And I would start to consider more risky things (e.g. finding a babysitter) through Facebook that I wouldn't ever do on CraigsList.
Craiglist's solution is simple--their exhortations to only deal locally means that if I'm looking for a house or a car, I will see it before I give money. The scammers are aiming at people that ignore that rule.
Plenty of people buy and sell long distance on Craigslist, but that is really a caveat emptor situation outside of how the site is intended to be used.
In that discussion is reference to this graphic, which does a good job illustrating many of the would-be craigslist-crushers (although most go after niches rather than the whole pie): http://s3.amazonaws.com/data.tumblr.com/tumblr_kwkfi5tqEi1qz...
Keep in mind you don't have to keep people's stuff, you can always re-sell it on ebay or craigslist :-) (and re-list it on your mythical new site. now you have inventory for the buyers and you are the buyer for the sellers)
I was lucky to have professor Jakki Mohr as a teacher, and she advocated the "bowling alley" strategy:
http://wisepreneur.com/innovation-marketing-2/innovation-mar...
As the article states, and lesterman shows below, there are several startups that succeeded in beating Cragislist.. but they all did so by focusing on a specific niche.
"June 12th: We no longer include vehicles from Craigslist, as they have requested that we not index their listings"
Too bad, it is a killer car shopping site, but without the massive craigslist db of results, they won't have nearly as much to offer.
Craigslist should really introduce a paid API or something, since they seem to hate being scraped. I think they fear becoming irrelevant.
I wonder if someone hasn't got a site where you can submit on craigslist and use an addon to simultaneously submit to their site - basically letting the browser do a multicast of the data.
However, I do believe that competing with Craigslist might be a bit easier given that there is almost no innovation happening in the product. Craigslist hasn't changed much since I first used it 7 years ago. There is definitely an opportunity to disrupt Craigslist position and it's a matter of time.
Craigslist is in an amazing position right now and they have a lot of potential to really continue to dominate. Ultimately, Craigslist's demise will be through its own undoing of not actually trying to compete and innovate.
A "flounder" is a fish! She means "founder", which is a verb which roughly means "sink".
(intransitive) To act clumsily or confused; to struggle or be flustered.
"He gave a good speech, but floundered when audience
members asked questions he could not answer well."But CL has both traffic and a well-known brand, investor money can't buy that.
Any feature you add is useless when there's no content, and there's no content because nobody goes to your site, and nobody goes because there's no content, see how it goes?
And of course CL knows better than letting you "borrow" their ads...