Kijiji and the Curse of Craigslist

25 Comments

Online classifieds have been at once among the most disruptive of Internet sectors and the hardest to break into. Google and Yahoo set up initiatives there, only to see them grow ever more marginalized. Now eBay’s Kijiji, having polished its act for more than two years outside the U.S., has set up shop on turf long dominated by Craigslist. The news got me thinking about why no one has been able to stop Craig Newmark and his skeleton-crew staff. There are some lessons there that apply to Internet business in general.

Kijiji’s extremely low-key launch last week was greeted with pokerfaced analysis by more mainstream outlets and by snickering from some blogs. And there’s reason for both. If eBay can interlace Kijiji with its marketplace business, it has a strong base from which to compete against Craigslist. On the other hand, eBay is now competing with itself – it owns a 25% stake in Craigslist – and that is just the kind of thinking that has gotten Yahoo in trouble.

One analyst, Ben Schachter of UBS, was optimistic, but only over the long term. I think he’s right. There are short-term nuts to crack first, such as: How do you make money at this? If you charge a fee for listings, everyone will head straight to Craigslist, which is free. And if you rely on ads, then those ads are competing for attention with the people who put the listing on your site.

Moving into the online-classifieds business is a bit like being in a pickup bar around closing time: The opportunities that stand before you often look much more enticing than they may be in reality. We keep reading about how newspapers are starving to death because the Internet – especially online classifieds – keep eating their lunch. And their dinner and breakfast.

So it’s reasonable to think, in a Tony Robbins kind of sunny logic: “If newspapers are losing money on classifieds, then someone must be making money – why can’t that someone be me?” But the thing is, no one is really making all the money that the newspapers are losing. And there’s one reason for it: Craig Newmark.

I like reading about Newmark in the business press, which simply doesn’t get him. He’s referred to with bizarre labels like socialist (whether Stalin-style socialism or Swedish-style socialism depends, I guess, on whether or not you’re in print). Nevermind that Newmark has painstakingly nurtured his list into one of the most essential properties on the Web, succeeding where many others failed.

No, Newmark is an oddball because he leaves money on the table. If Wall Street were a church, that would violate a sacred commandment. Craigslist reportedly made $25 million last year, which is really nothing next to its potential. With one phone call to Goldman Sachs, Newmark could launch the biggest tech IPO of the next year or so and make enough money to built a rocket to fire into orbit, where it would bump into all the other rockets built by tech billionaires. But he doesn’t! It’s just so … so … socialist!

Actually, Newmark is not so much a radical as a hard-core traditionalist, harking back to the days when people created something on the Internet because they thought it would give other people what they needed. And that is the reason behind Craigslist’s success, its secret sauce.

In the years since those early days, the Internet has become a big, honking, disruptive, money-creating machine. Not only was this inevitable, it’s become necessary for people (like me) who make a living off the Internet. By holding out, Newmark isn’t rebelling against Internet business as he is offering a key lesson. Imagine a line running between two poles, one of which is a Newmark-like devotion to the consumer and the other a desire to make money. There is overlap, of course, but not enough: Move too close to Newmark’s user focus and shareholders get antsy; go too far in the other direction and your customers will look elsewhere. A smart company is constantly assessing where it stands on that line.

There are people at eBay who understand this, which is why the company may emerge as the first real competitor to Craigslist. That would be good for Craigslist, since it would spur it to better address some of its weaknesses: spam listings, fraud, unethical sellers. But to do that right, it would help for eBay to sell its stake back to Craigslist. At this point, the two are better off as competitors than friends.

25 Comments

Michelle

Interesting article regarding CraigsList. Check out our site if you are ever in the market for an apartment in New York City. We are a great alternative to what you will find on CraigsList.

EPC

I am hopeing for someone to start up a rival to kijiji and cragslist that will allow the sellers to be able to sell in what ever city they want and not to be linited to the city they are living in. Call it Free to sell or something.

Toronto poster

This is the first objective article I have ever read on the topic.I almost never went beyond the second line of any article on classifieds without concluding it’s way off the wall,

CliqueCanada

I believe that, the bigger the classified (and thus more successful) the more difficult it becomes for the individual to actually find anything.

When presented with to many options, we as humans occassionally become over whelmed, at least I do. Today I walked into Subway and was asked what kind of sub I wanted, while I starred blank at the board. :)

Small is sometimes better, and certainly it does little harm for others to compete.

Here is our own little classifieds niche somewhere in the corner of the Internet: http://www.cliquecanada.com/classifieds

Moshe Maeir

Great Article.
Trivia question – how many people on Facebook have the name Kevin Kelleher??
Answer – way too many to find you there!

Slavito

People in the US may not realize this, but Kijiji is already making an impact – with its foreign sites. And it sure learned a few things along the way.

For one, Craig’s contempt towards foreign markets and foreign languages is one major weakness waiting to be exploited. I remember first seeing the promise “la version française bientôt disponible” (French version coming soon) on Craigslist-Paris a few years ago. Actually, the promise is still there (misspelled, btw). The French version is not.

Check out Kijiji in Paris (hint: it’s in French):

http://paris.kijiji.fr/

And now compare the numbers for the real estate section (arguably, CL’s most popular feature):

Kijiji: Immobilier (30,285)
Craigslist: Housing (7,225)

Whose site would you rather advertise on to reach the locals? CL, in English with 7 thousand ads or on Kijiji, in French with 30 thousand?

Some might say “big deal” – let Kijiji have Paris. But it’s not just Paris. Gumtree (Kijiji’s brand in London) has far more ads than CL’s anemic CL-London. So, London, Paris, and pretty much every single major city outside of US Kijiji already won.

It learned (or learning quickly) to adapt its brand, marketing, even colors to the taste of the local market. Craiglist, meanwhile, has been standing still and growing more and more pale by comparison.

I think Kijiji will find a unique, convincing way to please New Yorkers, Chicagoans, Bostonians and perhaps one day – even SF residents. And cookie-cutter Craiglist will probably remain the same for everybody, targeting no one in particular.

And finally, Craig: with $25M / year you can afford a goddamn designer.

Anthony Kuhn

Great insights into a sticky problem for our friends at Ebay.com. I included this piece on my blog at http://www.innovators-network.org where there are lots of good resources for innovators, small businesses, venture capitalists, and the generally curious webizen. Click on, fearless surfer!

Alex

Kevin, exceptionally well written analysis of eBay’s Kijiji. One thing, however, I highly doubt: eBay’s integration of Kijiji with its marketplace. They have made numerous remarks regarding their hesitance to move into the consumer services market, due to the inherent issues. I don’t like to make fast conclusions, but they are a consumer goods marketplace, and Kijiji is a classifieds site — that’s all. The following disclaimer at the bottom right hand corner of every listing page tells me something: “Avoid fraud by meeting all sellers in-person to pay for items. Kijiji does not offer any transaction or payment services.” They don’t offer that currently, and they probably never will.

Ian

“leaving money on the table” is not a “bug” it’s a “feature”! It makes it very very hard to compete with; and gains them lots of content (ad listings); which gets them lots of consumers.

David

First off, Kevin, thanks for such a clear thought on craigslist. I am personally inspired by Craigslist – and Craig’s principles. It reminds me that even though I clearly want big profit, that I’ve got to keep the customers ultimate satisfaction in mind, and not take the shortcuts.

JD, I have to disagree with you about eBay – they do what they say they do best – creating – and keeping the largest auction site in the world tremendously successful. Yes, they have been jacking around with skype for two years too long – and still haven’t used it to it’s potential – or integrated it with paypal and ebay.

On the other hand, they haven’t really stretched themselves thin like Yahoo has – so they can still monetize and use their properties to their ultimate potential.

I’m not convinced that they will ever make money off of kijiji. There is no profit model inherent that they have been successful with in the past. I think that they are hedging their bets, and creating a competitor to their own auction site. This way, if eBay is to continue losing steam, they also have a different sales model that runs itself etc.

I think that there is alot to be desired on craigslist in terms of features, that they could increase, and steal market share with. They could have a better ad creator, better search, and more specific categories.

Sincerely,
David Jaeger

Randy Smythe

Kevin, I couldn’t agree with you more. I think eBay wanted to buy Craig’s List and came up against a guy with principals. Once they learned how Craig’s List works from the inside, via a board seat, its now time to compete. A flip on the old saying “If you can’t buy em’, beat em'”

If eBay wants to make a serious move they have the resources to do it.

Joel Cheesman

Kijiji might make a significant impact, but it’s very doubtful. The online recruitment space, for example, is incredibly cluttered, making it nearly impossible for newbies to make an impact. Most Internet recruiting experts put the number of online job boards at 40,000 and growing globally. The typical HR person simply ignores most of the noise. I’ll be surprised if 1/4 of recruiting pros can spell Kijiji in 5 years, let alone use it.

Kevin Kelleher

Steve, you misread me if you think I am being critical of Craigslist’s business model. I agree it makes more than enough money. However, I can’t abide by your use of the term “stakeholder” – it’s evolved to include everyone, not just shareowners (including rival eBay) and employees, but also customers, and the customers of customers (the people who buy from those who post on Craigslist) as well as the broader community, which in the case of Craigslist includes the newspapers it’s “competing” against. So how can you say it’s truly making money for all its stakeholders?

Dustin, thanks!

James, I agree with your sentiment. It’s one thing to work like hell, it’s another to do so in a rat race.

james

If you look at the money-happiness curve, Craig obviously does not need much to enjoy his life. Why bother competing in the crazy rat race? Money is just not that important to him. Social capital is much more important. Benkler calls it peer production. Some call it socialism (related to, but not necessarily), which i guess is a hard thing to understand living in the the hardcore “survival of the fittest” money-driven US.

JD

All of this analysis presupposes that eBay makes good business decisions, executes well and rolls out quality products, none of which is the case.

Dustin

Exceptionally well written article. I look forward to reading more of them.

Steve Stroh

Well… Kevin doesn’t quite get it either. The purpose of any business is to make money for its stakeholders. Craigslist does that handily – Newmark has said that Craigslist makes a lot more money than is needed for covering the actual expenses, including reasonable salaries.

In short, the Craiglist financial model WORKS for those who have a stake in it… and that’s all that really matters in the end.

Om Malik

i love it – there is at least one person i can count on to remember my only moment of clarity in past 12 months. thanks jesse.

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