Sunday, January 02, 2005

My dog peed on your bag. Let's do coffee.

Peter Zollman, a doughty consultant trying to rescue newspapers from self-inflicted extinction, popped some eyeballs during the holidays when he put a big number on a phenomenon that was hiding in plain sight.

Peter, a partner in Classified Intelligence, estimated that Craig's List has cost the San Francisco area newspapers between $50 million and $65 million in classified-ad revenues by simply giving away (mostly) free listings on an expansive and ever-expanding web site.

All ads on Craig's are free, with the exception of $75 per help-wanted listing in San Francisco and $25 for each help-wanted ad in New York and Los Angeles. (The employer entering an ad online pays the fee for every category in which a job is listed; thus, the same ad in three categories would cost $75 in New York.) My cocktail-napkin calculation suggests Craig's could book easily $1 million a month in revenues, though founder Craig Newmark responds that "the estimate could easily be too high, much too high." If I am wrong today, which wouldn't be the first time, it is only a matter of time until the List fulfills my projection.

Craig's typically is among the 150 busiest web sites, according to Alexa.Com, an Amazon-owned index. Craig's averages nearly 20 views per session, or almost twice as many as the leading web destination, Yahoo. Craig's Lists are operating in 68 US cities; 12 European cities; 7 UK cities; 6 Asian cities; 6 cities in Australia and New Zealand; 2 cities in South America and Mexico City. You can see the cities and the relative extent of their traffic by clicking here. You can count on more lists opening in more places.

In reflecting on the Craig's juggernaut, it would be a mistake for newspaper and other legacy media execs to focus only on the loss of past and future ad revenues. Beyond listings for free moving boxes, old kitchen sinks, used Hummers, million-dollar houses and nude, "no sex" modeling gigs, Craig's has become the go-to place for urban dwellers hunting for a plumber; recovering from attempted suicide; hiring a polka band, and of, course, looking for love. Which brings to mind a recent "missed connections" listing from Boston headlined: "My dog peed on your bag on Monday afternoon, can we have coffee?"

Craig's List sprang from the desire of Craig, a San Francisco computer engineer, to create a virtual community to help virtual strangers navigate contemporary metro life. The community, sans promotional dollars, grew organically and exponentially, and Craig has continued to run the list privately with a headcount of 18 souls. Assuming $1 million a month in revenues and no Learjet for Craig, the company could be banking a profit of almost 50 cents on every dollar in sales.

Craig steadfastly resisted investors and would-be acquirers until eBay last summer bought 25% of the company from a former employee who decided to cash out his stock. Even though the folks at eBay said they wouldn't have done the deal if Craig had demurred and even though both sides pronounced the deal "amicable," Craig probably could not have stopped a determined eBay if he wanted to. Since then, eBay has been " a good partner [with a] similar moral compass," says Craig. "However, we're a community service, [and] had agreed that any equity in Craig's List had only symbolic value."

Craig is a thoroughly unassuming incipient millionaire. ("I have no idea where you got the idea I'm a millionaire," he said in a response to my original post. "Sorry, please don't spread that rumor.") He rapidly answers his own email, personally pulls postings that violate the rules of the web site and pursues his own closely held vision for the future of this phenomenon. Without a doubt, Craig could make much more money by charging for more types of ads in more markets. Or, he could avoid the muss and fuss of building his business by selling the enviable brand to any number of eager suitors.

Though Craig at the moment appears to be staying the course, he easily could add traditional news, entertainment listings, sports and weather to become -- Voila! -- an online newspaper rivaling the web traffic of most major titles. Add audio and video, and he becomes -- Voila again! -- a challenger to radio and TV. If he invites his community to contribute to his newsgathering efforts, he wisely will add another (no-cost) tie that binds.

As he ponders his next moves, Craig can take comfort in the knowledge that many media giants are slumbering. When Peter Zollman three months ago asked the executives of 36 large newspapers what they were doing about Craig's List, 14 said "they had never heard of Craig's List or were only vaguely familiar with it." The 14 unperturbed execs included a few who already had robust lists operating on their home turf, according to Peter.

One publishing exec admittedly alarmed by Craig's is Bob Cauthorn, the former VP of digital media at the San Francisco Chronicle. He notes in Peter's report that Craig ran 12,000 employment ads to 4,900 for the Chron in the week of Nov. 21, 2004. The Chronicle itself even advertises jobs on Craig's, reports Bob, "because its own recruitment ads deliver unsatisfactory results." That's gotta hurt.

Which brings us back to the wistful plea of the Boston woman whose dog tinkled on the cute guy's bag. If Mr. Backpack overlooks his ire, he may parlay Fluffy's indiscretion into the pleasurable embrace of the hound's flustered owner. If newspapers can swallow the humiliation of being beaten at their own game, they similarly may find it valuable to snuggle up with Craig.

If they don't act soon, however, they won't have a backback to pee on.

5 Comments:

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