Steve Cotler

Craigslist, the largest source of classified ads in any medium throughout the world, serves 450 cities in 50 countries.

Started in 1995 by software engineer Craig Newmark, 55, as a bulletin board for posting notices of social events relevant to San Francisco-based software and internet developers, Craigslist now adds 30 million new listings and logs 10 billion page views each month! But 94% of Craigslist’s ads are free, and it doesn’t take advertising from outsiders, yet it makes a profit and is growing at an extraordinary rate. How does it do this? And why?

The company has been approached many times with lucrative advertising offers, yet it consistently refuses to put banner or text ads on its pages. CEO Jim Buckmaster, 45, in a radio interview today on the “Conversations from the Corner Office” segment of PBS’s Marketplace says, “[We] are trying to maximize social good rather than revenues or profits…[I]t’s explained to us the massive amount of revenue that would come should we put text ads and banner ads on the site, but the simple reality is that users aren’t asking for it so we don’t consider putting them there.” The only revenue Craigslist does collect is for employment ads in ten cities and for broker-placed apartment rentals in New York City.

There is little doubt that Craigslist has hurt newspapers, eating hugely into the classified ad revenue that was once almost exclusively theirs. But with only two dozen employees and a low-rent corporate headquarters in an old San Francisco Victorian, Craigslist’s market dominance will be difficult to challenge. It seems unlikely that profit-driven companies that are responsible primarily to their stockholders will be able to come up with a business model that can compete.

At a time when dominant ISP’s are fighting against “network neutrality” by trying to build support for a tiered internet where users who pay more will get faster service, Craigslist’s “ad neutrality” (almost everyone pays the same—nothing!—for ads) is unique. Newmark and Buckmaster have created an efficient, low-cost way to bring buyers and sellers together while placing social good above maximizing profits. And what does it say that the favicon that accompanies the www.craigslist.org URL is a purple peace symbol. Fringe lefties dominating a business sector? I bet it makes Wall Street nervous.

What if a drug company adopted the Craigslist corporate philosophy?