What according to you makes a website successful and crowded with millions of visitors? A fancy user interface and powerful marketing strategies, right? Nope! If that’s the case, Craigslist would have disappeared long back in this digital era.
Of course, user-interface, advertisements and marketing play key roles to grow a business. But Craigslist proves that are not only ways. In fact, if you have visited the site, you would have wondered how this website even survives now. Isn’t it?
Craigslist has a quite interesting history and ideas that made it a brilliant website on the earth.
First things first, it replaced the newspaper’s classified ads. It lets users post anything that can be sold or served to nearby places for free and effortlessly. The idea of advertising the products and services online for free attracted more and more people.
The interesting part is that a company that was started as a not-for-profit organization is now worth billions of dollars.
So, curious to know how this zero-profit organization turned into a successful and profitable one? Well, let’s look into that in this article. Before that let us see how the company was started and how it works to better understand its business model.
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Short Story of Craigslist
Craigslist is the #1 classified marketplace to buy and sell second hand items, advertise jobs, housing, services, community, gigs, resumes, personals, discussion forums etc.
Craig Newmark, an American entrepreneur and philanthropist founded Craigslist this successful advertising website in 1995.
You will be surprised to know that the website which is now a $3 billion was first created as a side gig. Yes, Craigslist was first started as a newsletter website. The founder used to send emails to his friends about the arts and technology events and over time he also sent about sales and jobs. He then created a website to provide the same service to a wide range of people.
He named the website Craigslist after he learned that his friends named his emails as “Craig’s list”. Within a short period of time, by 1997 his website had got millions of visitors and views.
The founder, in 1999 left his job and became involved completely in developing the website along with a few volunteers.
Read: How Etsy, a popular platform for buying and selling handmade and vintage products makes money. Etsy Business Model – How Etsy Makes Money
How Craigslist Works?
Craigslist which looks simple in design became popular majorly through word-of-mouth. It has grown into such a level that it became a synonym for classified in major parts of the world. However, it holds a major market share in the U.S.
The website that was started as a side-gig, and no-for-profit, turned out into for-profit in 1999. That was completely to help itself survive.
This online classified website that is a marketplace for all eligible things that can be bought and sold. Right from second-hand items to real estate, automobiles and services, the platform provides giant room for both buyers and sellers. Moreover, with its features such as nearby location detection, category sections, it simply impressed users with its ease of navigation.
It in fact, helps buyers to find affordable products and services from legit sellers. In the same way it helps sellers to sell items pretty easily for free.
However, in order to cover its expenses, Craigslist charges for listing of certain products and services in some areas where the demand is high.
Again, the CEO claims that the charges are purely for managing the website’s expenses.
Craigslist Charges
Let us see the services that Craigslist charges for.
So, everything is free on Craigslist except for the below mentioned listing.
Job posting in US and a few CA areas – $10-75
Apartment rentals in Boston, NYC and Chicago areas – $5
Real estate (commercial) in the U.S -$5
Vehicles by-dealer categories in the US, Vancouver BC – $5
Vehicles by-owner categories in the US – $5
All listings of sale by dealer categories in the U.S – $3-5
Gigs in the US and a few CA areas – $3-10
Services in US and CA – $5
The surprising part is that the website has not yet adapted banner advertising. Though sponsored ads are a potential source to make money, its CEO Jim Buckmaster hesitates that it would ruin the website’s and brand quality. However, advertisements are a considered option to make money for the website in future for the website, as it might take time for it to adapt.
This is why in fact there are no clues of how Craigslist makes money while offering its services mostly for free. Anyhow, you will get a clarity in the below section, Craigslist business model.
Craigslist Business Model
Craigslist, the local online classified website, is now present in over 70 countries. It handles over 55 million monthly visitors which makes it one of the successful and crowded websites on the earth.
Though it started as a not-for-profit organization, the company is now making 80% profit. Yes, you’ve heard it right!
It is clear from the above para that, unlike other websites and businesses, Craigslist never displays ads on its website. You will be surprised to know that Craigslist had never gone public and had no investors. Yes, the company was never raised from fundings.
The only way it makes money is by charging fees for certain listings such as job posting. However, that is both to avoid spam and to manage website costs.
How Much Profit Craigslist Makes?
As of 2016, Craigslist generated a revenue of $700 million and 80% profit. It was then valued at around $3 billion. And that is all from the charges for certain postings.
In fact, its business strategy is so strong and brilliant that it has survived, and even surpassing all its competitors in the domain even today.
With its sole business motive and strategy, the company has been surviving successfully expanding to different countries. In 2008 it became a multilingual website.
Moreover, its no wonder that Craigslist helped other businesses to grow. In fact, you would be surprised to know that Brian Chesky and Joe Gebbia, founders of Airbnb drove users from Craigslist to Airbed & Breakfast (now Airbnb) in initial days.
Airbnb is now a highly successful platform for vacation rentals that is worth of over $31 billion. Want to know how Airbnb makes money? Read it here.
Coming back, Craigslist, an incredible advertising platform created a tough war with eBay which then thought of acquiring the company. It purchased 25% of the Craigslist to suppress the competition. Yet, it did not happen.
Okay, let us quickly jump into analyzing how Craigslist makes money.
How Craigslist Makes Money?
As said Craigslist charges certain fees for listings that are on high demand and also based on regions. Say, it charges $75 for job posting in the San Francisco region and $25 for job listings in different areas of the U.S cities. It charges $10 for apartment rental in New York etc.. as mentioned above.
Fees
Thus, Craigslist makes money completely from the charges is collects from certain postings. However, the founder claims that they are charging the money for covering the expenses of the company and are not making any profits. Also, the revenue and profit of the company is not disclosed to the public. Yet, it is clear that it bags a good profit for the company.
According to AIM, Craigslist makes major revenue from the U.S markers. It has over 55 million monthly visitors from different countries such as Japan, U.S, Canada and Australia.
The major benefit of Craigslist is that it works as a peer-to-peer, agency-to-peer and agency-to-agency model. Meaning, anybody can advertise on the platform as the audience base is vast. Hence, Craigslist has and is going to have a wide audience every time. In fact, if that continues and the company decides to introduce ads on the website taking proper measures, it will make a huge revenue.
C-Plus App for Mobiles
Craigslist never lags behind any new age websites in its niche. In order to help users access its website frequently, it launched the CPlus app. Users can download the app on smartphones and tablets to enjoy visiting Craigslist smoothly and frequently. Though it doesn’t directly make money from the app, it is competing with newer trends and keeping its users.
Bottom Line
With a huge user base, and million of active monthly visitors, Craigslist has gained immense popularity. In fact, it is no less than big companies such as Google, and Facebook. However, despite amazing resources such as a wide audience and millions of users, Craigslist has never tried expanding its brand into other things. It strictly adhered to its core purpose. This way there is so much to learn from its business model.
Today, though there are strong competitors such as Facebook Marketplace, eBay Classifieds, Letgo, etc., Craigslist has its own uniqueness and popularity. In fact, that is why the company is still serving millions of users on its own platform. It is even surviving in the deadly competitive era without even running ads, which has become a mandatory trend for websites to survive.
Hope you found enough and clear information about Craigslist business model and how it makes money.
