Imagine what it might have been like to be Dr Kleenex. You invent a modern miracle, the cheap paper handkerchief, and suddenly you become the person blamed for America’s disposable culture, praised for a more convenient life, or both.
There never was a Dr Kleenex, though—the product was created by a team of researchers at Kimberly-Clark laboratories in the 1920s. But there is a real Craig in Craigslist, and lately he is looking at life beyond his little list that happens to be the seventh most popular website in the US.
Listing gains: Craig Newmark scoffs at the notion that his popular free website is strangling newspapers.
It is also a site that is deeply tied up with the fate of newspapers—indeed, many in the newspaper industry blame the site’s founder, Craig Newmark, for the downturn in their classified advertising business.
An ardently no-frills, ad-free, user-sensitive site, Craigslist has, by the estimate of its CEO, Jim Buckmaster, generated more than 600 million free classified listings. Though nearly all listings remain free, Craigslist has added modest fees for job listings and real estate brokers in certain big cities, and from those fees, the firm generates $80-100 million (Rs331-414 crore) in annual revenue. It has a staff of 25, including Newmark.
In the US and beyond, Craig-slist is digging even deeper into the classified ad markets. Once, an announcement that Craigslist was expanding mea-nt adding cities such as Miami, Minneapolis and Philadelphia. These days, it means places such as Janesville, Wisconsin, (population: about 60,000) and Farmington, New Mexico, (roughly 38,000) as well as Ce-bu in the Philippines and, by Newmark’s request, a site for Ramallah on the West Bank.
In the face of this expansion, Newmark is becoming more of a public figure, capitalizing on his success to promote causes that include supporting the Barack Obama campaign and financing investigative journalism—not, he insists, to compensate for any damage Craigslist has done to the newspaper business, which he calls “an urban myth”.
Sitting in a coffee shop in San Francisco a month ago, explaining his plans in neat, mathematical style, Newmark presented an unassuming public presence. He was perched on an ordinary seat, a six-year-old Prius parked nearby, a Kangol beret on his balding head.
Newmark used to spend two-thirds of his time working on customer service issues, he said, and the remaining one-third on “founder issues”, a catchall term he uses for his public-spirited work. That division, he said, would now be half and half. But before he can extricate himself from customer issues, Newmark will have to resolve some of the growing business and legal complexities that surround Craigslist, a laid-back operation that is bumping into tough-minded competitors.
A Delaware lawsuit accuses him and Buckmaster of boardroom chicanery, an assertion they emphatically deny. Their accuser is eBay, which became a minority shareholder in 2004 with a stake of roughly 28%.
And while executives at Craigslist maintain that for many years he has not had a significant leadership role there, the eBay lawsuit describes Newmark, in addition to being a large shareholder, as chairman (the board has two members; it had been three).
The suit was set in motion by eBay’s decision to introduce a rival online classified site, Kijiji, in the US last year. Kijiji is already the market leader in Canada, Germany, Italy and Taiwan. EBay’s complaint contends that after the Kijiji move, Newmark and Buckmaster plotted in secret to dilute eBay’s influence in the firm, including an effort to deprive it of its board seat. The lawsuit asks the court to reverse those provisions.
Craigslist is expected to respond to the complaint this month, but on its blog it offered an assessment: “Sadly, we have an uncomfortably conflicted shareholder in our midst, one that is obsessed with dominating online classifieds for the purpose of maximizing its own profits.”
The phrase “maximizing its own profits” broadly outlines the fight between the two firms. Despite its success, Craigslist prides itself on its grassroots instincts and user-based content. Even broad strategic decisions, such as which areas to expand into, are described as reflecting user requests made at online forums at the site.
As the complaint indicated, last year Buckmaster wrote to Meg Whitman, then the chief executive of eBay, saying, “We are no longer comfortable having eBay as a shareholder, and wish to explore options for our repurchase, or for otherwise finding a new home for these shares.”
In an email message of its own, eBay emphasized that the two firms would remain joined. “We would obviously prefer to see this resolved without litigation,” eBay wrote. “With that said, we will only accept a resolution that preserves our rights and the full value of our investment in Craigslist. We will continue to act openly and in good faith as a minority shareholder.”
The competition between the firms is also heating up outside court. EBay has recently sent email messages to its users promoting Kijiji, and Craigslist in the last few weeks has added 120 cities, half of them overseas, where Kijiji has been dominant.
The websites’ expansion comes as newspapers are experiencing a steep downturn in classified advertising. Print classified advertising declined 16% last year, to $14.2 billion, according to the Newspaper Association of America, below the 1996 level, even without adjusting for inflation.
In this straitened market, Craigslist becomes shorthand for the threat that online advertising outlets are seen as posing to newspapers.
Buckmaster responds by saying Craigslist has no sales force and has not sought to win over newspaper advertisers, in contrast to firms such as the job listing site Monster.
“There are bigger things that have been more problematic for newspapers,” he added, including circulation losses and basic mismanagement. “Newspapers have an enormous amount of debt. That is not something that can be laid at our doorstep.”
Clayton Frink is the publisher of The Capital Times in Madison, Wisconsin, where Craigslist arrived in 2005. The newspaper last month stopped printing daily, adopting a Web strategy and printing weekly. “They have ads we would have had once upon a time,” Frink said, but added that his staff did not consider it “No. 1 or No. 2 or 3 of websites that hurt our business.” The bigger enemy, he said, is the changing market place, noting that large employers used to buy a page-and-a-half for job listings and “now they put in a small ad saying to see their website.”
“What Craigslist does well is build a community and a feel of a community,” Frink said. “Building communities is going to be critical for any online product, whether a newspaper or not.”
Also, Craigslist no longer sneaks up on local newspapers. Sammy Lopez, publisher of The Daily Times in Farmington, said: “We’ve been kind of watching them. You can get on Craigslist and see if people have been requesting a site. I asked someone to look at that four or five months ago, and saw that they had.” He said the knowledge that Craigslist would be arriving someday led the paper to improve its online presentation of classified ads. He noted that a vibrant classified ad section was both a revenue source and a reason that people buy the paper and visit the website.
Newmark is a believer in the power of technology to improve life—whether in the blogging he does for Obama, a visit he recently made to Israel where he argued in favour of micro-loans and technological innovation to build up the Palestinian economy, or the use of online tools to make government more transparent. He promotes these projects on his personal blog.
The list of good government and good journalism websites Newmark is involved with—sometimes financially, but more often as adviser and advocate in the Silicon Valley world—speak for themselves: factcheck.org, sunlightfoundation.com, PRWatch.org, NewsTrust.net, publicintegrity.org.
An article in The Observer of London two years ago described him as “readying his armoury of cash to invest in citizen journalism projects”. Newmark says he never donated more than $20,000 to any organization.
But he has not followed the common path to Silicon Valley philanthropy—create a successful website, sell the website either to a larger company or through an initial public offering, acquire a pile of cash, then give away part of that.
While unwilling to discuss his wealth, he said he could be a lot richer if he wanted to be. “We know these guys in Google and the eBay guys,” he said, “and they are not any happier than anyone else. A lot of money is a burden.”
©2008/The New York Times