However there are many vertical niches within classifieds that can still compete with Craigslist. Apartments, Houses, Cars, Crafts and Jobs have all split out into separate niches and seem to be doing well. There are still tons of smaller markets virtually untapped (Pets come to mind).
If CraigsList had an API, it would be a game-changer. Then it would dominate a lot more niches.
Agreed. As a long time CL user, I have thought the exact same thing. Short of API functionality and extensibility, I know of numerous scraper/mashup applications that utilize CL data. Unfortunately, this does fall far short of API extensibility and likely leads to liability in concerns to "stealing" CL's data - I would be apprehensive about investing 'too much' on any project that relies on scraping as chances are that the project will be killed by CL before reaching the critical user mass of "success".