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Paul Gillin's Blog - Social Media and the Open Enterprise: Nantucket Conference Day Two: Craigslist's curious success formula
Paul Gillin's Blog - Social Media and the Open Enterprise
Saturday, May 05, 2007
  Nantucket Conference Day Two: Craigslist's curious success formula
Craigslist.org CEO Jim Buckmaster was interviewed this morning on stage. Craigslist drives a lot of Internet and media companies crazy because it cares to little about profits. Its free classified ads undercut newspapers’ most profitable business and its remarkable growth (it’s one of the top 10 most trafficked sites on the Web with a staff of just 24 people) shows no signs of slowing.

Craigslist is a true social media disruptor. It has leveraged user interactivity and self-publishing to create a service that people love. In staying focused on user needs, it has pummeled its newspaper competitors who have historically offered expensive and slow services. Craigslist’s refusal to live by the almighty buck also makes a stirring example of how a service that keeps its eye on the ball – its users – and experience spectacular success.

The following is a more-or-less verbatim transcript of what Buckmaster said.

On why Craigslist doesn't have advertising
"We’ve been told by sales people that we could bring in many millions of dollars by adding text ads but our users aren’t asking us for text ads so we don’t have them. Paid search can create a conflict of interest with site search. The better your site search is, the less need there is for paid search."

On building community
"Something we learned early on is the more we can get out of the way and let users do things for themselves, it sounds lazy but laziness is part of it. The less you have to depend on someone in an office, users are better positioned than staff to serve themselves and help each other. The other thing is following up on feedback. The site has been hammered into shape by millions of requests over 12 years. Everything you see there today is the result of user feedback."

On the site's trademark boring text interface
"You might look to a boring interface as a reassuring thing to cling to as you’re looking at some of the outlandish things you see out there. We’re open in letting people use HTML in their postings, almost to a fault. People aren’t looking for the interface to be exciting. They’re looking to it to be fast, reliable and easy to use."

On preventing inappropriate material from appearing on the site
"We’re approaching 20 million new classifieds per month. The answer (to inappropriate material) has been to let users flag something that’s inappropriate. If enough users flag it, it comes down automatically. Inappropriate ads usually come down within a few minutes. It’s not perfect, but it’s far more effective than a centralized staff could do."

On a recent lawsuit over classified ad content
"A group of attorneys in Chicago filed a suit, tried to take us to task over a small number of postings they thought ran afoul of fair housing laws. Mostly they wouldn’t strike you as inappropriate. For example, the mention of a church in an ad was said to be discriminatory to people of a particular faith. That suit was dismissed. The group was attacking the law that exonerates service providers from being responsible for the content of their sites. If there wasn’t that law, a lot of sites like MySpace couldn’t function."

On why the company isn't more focused on making money
"This is where the descriptions like 'communist' and 'anarchist' come in. It seems to make no sense to let a site be as useful as possible and pay no attention to the monetary side. But it hasn’t been tempting. We enjoy working at Craigslist. Users like it and we’re not sure what we would do with a big surplus of cash. We’d probably look at ways to give it away.

"We give away at least 1% of revenue, but we haven’t had a chorus of users suggesting that we should run ads to generate funds for charity. People have that money now and they can give it away. We’re not in a position to be an arbiter of where that money should go."

On keeping the business simple
"We’re in the top 10 companies in traffic with a staff of 24, whereas the other companies on that list have staffs of more than 1,000. Early in the Internet boom, you tried to raise a lot of VC money and invest in esoteric hardware and expensive software. That never appealed to us. We invested in open source software from the beginning. We don’t have sales and marketing. We mainly have engineers. We don’t have meetings. We’re not trying to maximize revenue. When you’re not trying to maximize revenue, it’s surprising how little staff you need."

On EBay's 25% ownership stake
"That ownership is from an early shareholder who decided to sell his stake. EBay has been helpful to us in a few areas, like consumer protection. But on a day-to-day basis, there hasn’t been a lot of interaction."

At this point, audience questions begin

Q: How about cranking it up a little bit? If you went from 24 employees to 50 you could provide better services.
A:
We are planning to hire more tech staff and customer service staff. But we’re not constrained by capital now, so it’s not necessary for us to look for ways to make more money in order to hire people. We’re not looking to become a mid-sized company. We’re happy being a small company.

Q: Do you intend to do anything internationally?
A:
We have sites in 50 countries. They’re in English now but we’re laying the groundwork for multi-language support. For a small company to be prepared to offer support in languages you don’t understand is a big job. We’ve taken the approach we’ve always taken, which is to listen to user requests and when there are enough user requests, you do what they ask.

Q: How do you deal with regulators’ requests for information?
A:
We’re interfacing with regulators on a weekly basis. It runs the gamut from the Secret Service to local law enforcement to the FBI. We try to keep things small and simple internally and we have good external council. Hiring lawyers would be a, and while I’d like to have that, we also want to maintain a small company that people like to work at.

Q: What can companies like ours (entrepreneurial firms) learn from you?
A:
We don’t have meetings. People can work from wherever they are whenever they want. The tech model is built on alpha geek principle. We’re fortunate to have some fairly brilliant technical people. The one aspect of Craigslist that’s behind the scenes is how we manage to run a rapidly growing site with page load times that are among the fastest of any company. Open source is a big part of it.

Q: Who is Craig and what’s his role today?
A:
He splits his time between being a hands-on customer service rep and a variety of media-related roles. In the Bay Area, he’s become a kind of celebrity. He was on a game show, for instance.

Q: Have you ever had to fire anybody?
A:
It’s been more than five years. We had a rough patch where we had to do layoffs on our small scale. At the height of the bubble, more than 90% of our revenue was coming from dot-com job listings. Those declined by about 95%. By post-9/11, virtually all of the business we had had at the height of the boom was gone. We ended up letting some folks go who seemed to be contributing the least to our performance. That’s the last time that occurred.

Q: Have you ever thought of acquisitions like Angieslist?
A:
You see so many mergers and acquisitions go awry and you rarely see a case where companies are better off after a merger. Plus you spend so much time looking at legal documents, and that’s one of the things I enjoy least about the job.

Q: What are principles of someone who would make a worthy partner?
A:
Probably someone who’d be 100% focused on creating goodness for the end user without being clouded by sharp business interests that would cloud that. The dynamics of the Internet industry are so powerful that companies increasingly have the luxury of choosing a business model where they don’t come in to an adverse position with their customers. That’s been difficult in the past but you can do it now.

Q: Are you worried about competition, especially internationally?
A:
We don’t even look at what other companies are doing. We’re not setting out to conquer the world of achieve any particular market share. We’re just following up on what our users want us to do. We’ve got plenty of things to occupy our thoughts about how to do better by our users. That crowds our thoughts of fighting competition.

Internationally, there are a lot of companies that have copied our model years before we got there. As long as they’re providing the good things that Craigslist tries to provide, we don’t have a problem with that. We try to be there in a the background as an insurance policy in case they try to turn the screws on their customers. We’ll be there if necessary.

Q: If you rolled back the clock to 1999 or 2000, what have you learned?
A:
Our lives have gotten more complicated as the site has gotten bigger. Regulatory scrutiny is something we never had to consider in the past. The fact that it’s such a large marketplace invariably draws “bad guys” like spammers and wire transfer con games. It’s very hard to keep those people at bay. Both spam and scams are easy to avoid if you use the site as it was intended.

Q: What’s on your agenda for this year?
A:
Internationalization is a large project. Also a less clunky geographical dimension to searching and browsing. Each site is an island under its own. Take Massachusetts: we’ve got a separate site for Boston, a separate one for Cape Cod, a separate one for Worcester. It’d be nice if there were a little more flexibility in the geographic vector. And combating spam and scams is an arms race we’ll always be stuck with. The spammers are resourceful people, they’re technically quite competent, they’re making their living exploiting the big sites. Those are the big areas.

Q: If you were running a newspaper, what would you do? They don’t like you so much.
A:
To me, a newspaper’s role is to get high-quality, accurate information in front of readers. Long before I got to Craigslist, I felt that the big newspaper chains had gotten away from that by taking on debt and focusing on how to increase their profit margins. If it was me, I’d try to get back to the principles of how do I serve the role of the Fourth Estate well and keep from falling into this ridiculous war that we’re in. I was very disappointed with how newspapers dropped the ball in avoiding our getting into this war. I love newspapers and I read lots of them, but once you get away from what you’re about, it becomes difficult. You can’t serve Wall Street while you’re also trying to assist the public. If I were to choose, I’d try to serve the public and let the money side take care of itself.

Q: What are your guiding principles?
A:
We have a strong sense of laissez-faire: To each their own between consenting adults as long as you’re being legal and not taking advantage of people. And the philosophy of letting people use the site as they want. You have to comply with legalities, but beyond that, in our minds the moral side is largely subjective and users have a much richer sense of morality than we do and they’re empowered to make decisions about what should be on the site and what shouldn’t.

Q: If your users decided they liked another site better and trickled away, would that be okay?
A:
If were so inept that we couldn’t provide a value proposition that users found important, yeah, I’d probably encourage them to go away.

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