Craigslist is Worth More than EBay

Rich Skrenta dissects why Craigslist is so effective, in a must-read piece. Now it’s time to consider exactly how effective it is.

If the Genie of the Market were to offer you all of the future earnings from EBay or Craigslist, which would you take? I’d take Craigslist.

Note that I’m talking about the strengths of the business models here. I’m fully aware that EBay owns 25% of Craigslist, so to say that Craigslist the company is worth more than EBay the company, I’d be saying that the capitalized Craigslist business model earnings are equal to twice the capitalized EBay business model earnings, and that is not what I’m saying. For evaluating the above numbers, look at the earnings generated by the business models, or assume that EBay owns 0% of Craigslist.

Estimating Valuation by listings

Craigslist currently carries 6M ads per month. At least 200,000 of these listings are job postings. They are in close to 200 cities (looking at their home page). They probably only have critical mass in about ten of those cities or less (from some casual browsing).

Currently, Craigslist charges only for Job postings, and only in three cities. Taken from Craigslist itself, we can see the rates:

CraigslistJobFees.png

And now they are adding fees for apartments in NY, and jobs in Washington DC, San Diego, Boston, and Seattle. Basically, as soon as a category in a city hits unassailable critical mass, look out!

So, jobs alone is today worth about $5 Million per month ($25 * 200K). Craigslist isn’t monetizing it all, but the direction and the intent are both clear.

Of course, Craigslist will eventually be able to charge for jobs, apartments, real estate, cars, a little bit for personals, vacation rentals, services, big local items, and in some countries, small EBay items. Notice that online, each of those 7-8 other categories is on the same order of magnitude as jobs, or bigger. The EBay items part may need some clarification – in countries where the development of the Internet precedes the development of a reliable postal system, more product commerce will happen over a Craigslist-style local system than over an EBay-style national system.

If Craigslist only monetizes half of these, that’s $20M per month. All of them and it’s $40M per month.

But Craigslist is still growing. A LOT.

Here are some stats that Craigslist itself has been handing out (these are about three months old):

Growth

Overall Page View Growth Rate (all cities combined) for last 12 months: 195%

Raleigh, NC: 13M pages/month +800% last 12 mos
Vancouver, BC: 21M pages/month +675% last 12 mos
Dallas, TX: 22M pages/month +650% last 12 mos
Minneapolis: 21M pages/month +625% last 12 mos

Can they double in size within a year? Easily. More likely, Craigslist will triple or quadruple in size before growth starts slowing significantly. Our previous range of $20-$40M / month now goes to $40 – $160M / month (as we make more guesses, our accuracy goes down, of course). The midpoint has us at $100M in revenue per month, or about $1.2B per year!

Try it another way: Take 6M listings a month. Multiply by 10 as they hit critical mass in 100 cities, as opposed to approximately 10 cities today. Multiply by 2 since existing cities like NY, LA, SF will continue to grow. Charge for a mere 10% of the listings, and charge $10 per listing (that’s a steal compared to the newspapers, and lower than Craigslist’s current rates. It’s also an average charge of $1 per listing). That’s $1.4 Billion in revenue per year. Their cost is near-zero (no content, no marketing, community-based customer service, a dozen engineers). After taxes, that’s still $1B in profit per year. Give them EBay’s P/E and it’s worth $50+ Billion.

I’m not adjusting the P/E for the fact that they are growing much, much faster than EBay (although that will inevitably slow down), or that their international opportunity is larger than EBay’s (that pesky postal system thing again).

Traffic Check:

Here’s another fun way to look at it. Alexa and other ranking sites mis-classify Craigslist as a community site. It has a traffic rank of 33 on Alexa (up from #40 when I wrote my first draft of this article last November!!), but if you were to consider it as a commerce site (it’s classifieds, after all), it would be the 4th largest one, right behind Amazon, Ebay, and Yahoo.

Craigslist’s growth has actually picked UP. How many big, successful companies are doing that?

2005 has been a great year for Craigslist.

Of course, for the other classifieds sites, it’s a massacre:

So, will Craig take the money? Well, 25% of the company already belongs to EBay (they bought it from a co-founder of Craig’s). Of the remainder, undoubtedly some is in the hands of employees. Craig is probably somewhere between 50% and 60%. He may want to give some of it to charity. Or family. Inevitably, he will own less than 50%. At that point, you can bet that the company will embrace capitalism and the virtues of liquidity.

Craigslist is a dot-org no more. It’s a supercharged monopoly in the making for the single most monetizable category in the world (high-ticket items and classifieds), tripling or better year-over-year. And Craig Newmark, Customer Service Representative, is worth more than Larry Page or Sergei Brin.

The real story is that Craig is well on his way to building an EBay / Yahoo! sized business with no venture capital, no big-shot management, no marketing, no patents, no real technology, etc. He’s taken all the value from newspapers with none of the cost. And everyone loves him for it (probably because he’s leaving the money on the table). That’s the power of the Internet.

28 thoughts on “Craigslist is Worth More than EBay

  1. Hi Naval,I would not take Craigslist instead of eBay and here is why:1. Craigslist is a US focused company. Except for Canada there is not one single international destination where they have real traction – instead there is stiff local competition from similar models around the world like Kijiji, Gumtree, Loquo and Vivastreet.2. Google like eBay, Paypal and Skype are a true global companies and brands – Craigslist is not. I don’t think Craig is worth more than Larry and Sergei. 3. Don’t get me wrong – I think craigslist is terrific and I love their UI and the great community. But I think ultimately their growth is limited even if it looks steep now because they will not be able to tackle the international markets in the same way than they did in the US.BestMichael

  2. Michael,You’re talking about the current state of Craigslist, but the opportunity is there to grow to a fully international company. Really, there’s nothing preventing it from spreading to pretty much any country with decent internet penetration, since it’s community-powered.As a Canadian student, I’ve used Craigslist to find most of my apartments whenever I’m on a work term (every 4 months). With their Google maps integration feature, I’ve found them to be by far the most practical way there is of finding a rental property.Regards,John

  3. That factor of 10 for hitting critical mass in 100 cities ignores the fact that the cities with existing critical mass are the largest cities, which is part of why they’ve hit critical mass. If craigslist takes off in Rochester, no matter how impressively, it won’t be another Boston. The top 10 cities by population probably have about the same population as the next 90.

  4. Mike,Fair enough, but I’m really talking about Craigslist the business model v. EBay the business model. I touch on it in paragraph 3, but I should have been more explicit.Also, you’re right that the other cities are smaller, but not that much smaller by population, and Craigslist still isn’t anywhere near fully penetrated into large cities like NY, Chicago, Atlanta, Miami, Dallas, Austin, Seattle, etc. etc.Anyway, you can divide the cities by 2 and have them charge for 20% of listings instead of 10% and get to the same answer. Clearly, we’re trying to get an order-of-magnitude answer here rather than a precise one.

  5. Very good analysis you got here. I personally think Craigslist has the cult following that Myspace has attracted. And as more press gets generated, these companies will be getting even bigger. I think what has helped Craigslist so much has been its complete disregard for the capitalist system. The real question is going to become, "Will Craigslist be able to monetize its users and not have them feel violated?"

  6. Your second analysis in the article doesn’t seem to add up. As far as I can tell, 6M listings * 10 (to reach critical mass in 100 cities) = 60M listings *2 (due to growth in NYC/SF/LA) = 120M listings * 10% = 12M listings * $10/listing = $120M total revenuesSo . . . my interpretation is $120M . . . you state revenues of $1.4B . . . can you tell me what I’m doing wrong?

  7. I have to agree with Michael, Craigslist will have a very uphill battle gaining traction in international markets. I just had a meeting today with an employee at Vivastreet discussing how they have become the leader in the online classifieds space quite quickly.With that in mind, Craigslist will never have the worldwide ubiquity an Ebay or Google has.

  8. Seth, Michael,I’m talking about the "Cragislist business model" vs. the "Ebay business model" not about the value of the companies alone, so things like Gumtree, Vivastreet, etc., are subsumed.

  9. I really enjoyed your analysis, My suspicion is your insight about the profitability potential is on target and I think that it may also be the reason CraigsList ultimately gets trumped before it can ascend to that pinnacle where it generates more revenue than Ebay.Two very different threats I can forsee:1) Because of the huge revenue potential you described, Google, Ebay, Yahoo, Micro Soft and various media conglomerates will take a their very, very best shots at CraigsList. There may even be alliances amongst them if it they can’t beat CraigsList on their own. Ultimately, I see the suits winning this war.2) I found your article because I was searching for info about CraigsList which I had heard about but never used. Among the articles I read where references to explicit personal ads for hooking up. With the radicalized religious zealots running amok in our society I expect there will soon be a large and well organized effort to scandalize the brand name and make it socially unacceptable for many folks to acknowlege using it.Finally, the wild card threat revolves around the answer to the questions; Who owns the other percentages, When do they cash in, and when does control pass over to the dark side?Thanks you for engaging in this dialogue.

  10. I really liked you article, since i reside in Israel, and without any media effort I still know the Craig’s list brand and consider it veery friendly, i agree that the international potencial of the brand is huge, how ever I do agree with Eric that it well depands on the ability of the "suites" to temper with the brand’s name and reputation.=== thank you for the discussion it is enlighting … :)

  11. The problem that Craigs List faces is that it’s not a monitored or formatted community. There is no way to monitor transactions or commerce where there is not exchange through the sit. "Have bike helmet, will exchange for piano lessions" is a college bulletin board. And like a bulletin board, it is entirely dependant upon users. If/when users find a better place to post their notes, they’ll switch.BTW. Like the site layout… reminds me of something… http://www.nimbleit.squarespace.comJeff Barson

  12. your analysis is certainly interesting, but i think it ignores a couple key valuation issues, primarily time value of money. you’re saying that *when* craigslist gets critical mass in a bunch more markets and *then* when they’re able to start charging for listings in those markets, they’ll make a bunch of money. x 50, that’s bigger than ebay.but the correct way to do that would be to use the 10 year forward p/e multiple, not the current or one year forward multiple (i’m choosing 10 years as a guess for how long it will take them to get to the income you’re talking about – is that the right number? i don’t know). and that multiple will be a lot lower. how much lower? well, if we’re going to use ebay’s p/e and we assume that ebay earnings will grow by 15% per year – i have no idea what the right income growth rate is here – then the 10 year forward p/e multiple is more like 12x. 25% growth will give 5x or so. so, craigslist is worth, today according to your income figures and the ebay p/e, $5-15 billion. still a lot, but not $50.your analysis also avoids risk. ebay has a proven income stream. craigslist has proven their ability to charge modestly for a tiny fraction of their site in a couple markets in order to basically fund operations. there’s a huge risk associated with the proposition that craigslist will be able to grow into a bunch of markets AND start charging for everything and eventually begin pulling in $1.4 billion/year. (especially given the competition that will attract. right now no one really tries to compete with craigslist but if they’re making more than a small amount of money, people will begin pouring money into advertising and branding new sites as well as building their own communities by targeting distinct demographics and metro regions not fully penetrated by craigslist. i know you’re talking about the value of the business model, not the business, but that competition generally drives prices down.) i think it would be more appropriate to use a steep discount to the ebay multiple to account for all the risk.also, i think that it will be a long time before craigslist is able to monetize it’s classifieds in the way you describe and will only be able to monetize a very small fraction of them. I doubt they’ll be able to go beyond jobs and apartments in big cities. i’m sure it’s unavailable, but it would be interesting to see the ratio of job postings to other craigslist categories in SF, NY, LA vs. other metro areas. that would show us what kind of impact charging money has on the number of jobs posted when they cost money. if they were to charge for things other than jobs, it will change the game entirely and make people wonder if the chaos of craislist is worth it. if you’re gonna pay money, why not pay for a bit more service. apartments will probably be stickier than other categories. also, if you try and add a "big ticket" cut off, people will just scam it.but once they start charging and people become willing to consider alternatives, it will begin to erode the craigslist monopoly on local online classifieds. and once THAT happens, all the real value of craigslist will disappear into an ironically inefficient system (for the consumer) of competition.anyway, the interesting part of your analysis is just contemplating the hidden value of craigslist which is very cool and i’d never thought of before.

  13. this guy,You highlighted the actual flaws in my argument. You are correct. I was contemplating the strengths of business models more than the businesses, so I took the shortcuts that you point out. I might quibble on the timeframe and the discount rates (i.e, I think it’ll be less than 10 years, and thanks to Google, EBay may be worth even less), but your critique is basically accurate. Thanks for taking the time.

  14. Please dont compare Craigslist to eBay, but rather compare it to Skype. Skype has great technology but the world knows why it grew so big, simple answer there is "FREE" service and the massive network effect. That being said, today Skype is having a hard time monetizing it services and that is a problem that eBay has to bear. I think for sure Craigslist has also grown because of a free service model (beyond core job listings). It comes down to this that, How many people would show up on Craiglist once they begin to charge a fee, is a gazzilion dollar question. I personally wont. I use it because its free and because its free it has critical mass. Also what is to stop some 22 year old whiz to come out with another craiglist and offer free listings and gain critical mass.

  15. Craigslist is the main marketplace for free local classifieds. But dont count on them being the biggest for a long time.www.shopandsave.com is hot behind them with a launch in Toronto. Lets not forget kijiji owned by ebay. There banner ads are on every website. With an unlimited marketing budget kijiji is one of the largest free classifieds next to craigslist.com

  16. I was amazed when i came to know that a huge online classified like Craigslist which operates in nearly 200 cities across the globe follows such a simple business model. Craigslist always sticked to their basic busniess philosophy.Some Indian online classified like http://clickindia.com and http://sysindia.com are also following the same strategy and emering as a big player in Indian market.

  17. As an "Internet Layperson" ie. not being someone well versed in the intricacies of the net, I find Craigslist a confusing place to attempt any sort of advertising.I find their system of "flagging" to be very flawed, as I believe that "moderation by the masses", does not work well.As a moderator on various other "internet discussion boards" and social networking sites, all of whom "employ" various forms of "authorized moderation", it seems to me that for business people who attempt to advertise on Craigslist, that it truly is "the wild west" (as one person stated on another discussion about Craigslist) and that each subsection of the various listings on the CL site, is "ruled" by a few local tyrants, who seem to set their own rules regarding who is and who is not allowed to post there.They do this by manipulation of the Flagging system.The lack of any kind of "official" control will prevent the site from being as beneficial to the internet community as it could be, and, I believe, will eventually lead to a receding of the sites popularity.I apologize for my too frequent use of quotations around terms that I find difficult to define.And I cherish the civil and intelligent dialogue that I have found on this page.Just try to engage in a discussion like this on any of the craigslist forums, and after you quench the flames that will be cast at you, you will see what I mean.l would value any comments on these thoughts.Happy Holidays Everyone.Michael D. Fodor

  18. Hi this is kolam..THAT happens, all the real value of craigslist will disappear into an ironically inefficient system (for the consumer) of competition.anyway, the interesting part of your analysis is just contemplating the hidden value of craigslist which is very cool and i’d never thought of before.http://www.kolamdesigns.com

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