Thanks to a tip from a reader, we’re about to get a closer look at Craigslist founder Craig Newmark. During a speech and Q&A session, he was repeatedly self-deprecating and entirely candid about why Craigslist charges some of its users and not others.
Newmark acknowledged the unfairness. See if you notice the key word in his answer that should alarm newspaper execs.
We are inconsistent in that way. For example, we charge 25 bucks for a job posted here but not in Kansas, per say. And the reason is because the market in New York is mature, in the sense that it’s a nice solid job board, where you get an enormous amount of value for almost nothing. But also there is enough sketchy kind of jobs posted or outright scams in a city like our New York site such that by charging this token amount that discourages a lot of bad stuff from being posted. And that works in practice.
Did you catch the caveat, “mature,” in his answer? As I’ve warned before, Newmark’s strategy seems to be, first, stealing market share from newspapers by giving away ads for free. Then, when market share is solidified (a.k.a. “mature”), start charging users to post ads.
Of course, Newmark claims he’s not charging to make money. No. He’s charging because people want to be charged. Here’s how he explains that philosophy:
We started charging for apartment listings from brokers, and only in New York, in mid June of last year. The brokers asked us to charge them. They figured there would be less pressure to post and repost the same property. And we all figured it would get rid of the outright scammers and so on. That's worked really well. The amount of money involved is not much. And we honestly don't care about it. It's a token amount. But it's gotten rid of a lot of the crap, and it's gotten rid, as far as we can tell, all of the redundancy. The amount of postings dropped maybe 80 or 90 percent and that's good for everyone. The amount of complaints has gone down tremendously.
Newmark infers that charging was the only solution to this problem of bad ads and pressure to post for brokers. I disagree. Sounds more like a lack of imagination. And the folks in the audience seemed to pick up on it.
One asked why Craigslist doesn’t use a reputation system for sellers, similar to its partner eBay. Newmark’s response was a mess of inconsistencies.
I like the idea of connecting to user reputation systems. Because in real life, I mean, our reputation is a big chunk because you're reputation is how much people trust you. I like the idea of reputation systems online. People aren't really suggesting them to us. I do like the idea a great deal, but because people aren’t asking us, we have frankly procrastinated in that regards. And we, you know, have limited resources. For example, a lot of our technology resources are dedicated all the time to keeping the site fast and keeping the site as secure as we can make it.
Did you catch all those excuses crammed into one answer? First, let’s deal with this suggestion that absolutely no one is asking for a reputation system. The moderator seemed to smell a skunk on that one.
Moderator: “Since you asked would people like a reputation system, can we take a vote?” About a third of the audience raised their hands. It was an embarrassing moment for Mr. Newmark. Looks like it's time to stop with that excuse.
Secondly, Newmark claims “limited resources.” That directly contradicts other comments made during the appearance. For example:
We're not starving or really skimping or anything like that. At some point, you just don't have to make anymore (money). That's the way that works for us.
In one instance, Newmark insists that Craigslist is making plenty of money and has no need for more. And then in another instance, he’s claiming they’ve got limited resources and can’t work on improvements.
Newmark is obviously opposed to any option that doesn’t include charging for ads. And he’ll come up with any excuse he can to avoid alternative solutions until one day Craigslist charges in numerous “mature” markets.
Comments (8)
I think you're being a little hard on Craig -- and on Craigslist as a whole. It sounds like you were really hoping to catch him in a lie, but all you wound up with was an inconsistency.
Just because a third of the audience wanted a reputation-based system, does that mean Craig has to cave in and offer one?
Most reputation systems also happen to be seriously flawed and open to abuse, whereas hitting professional real estate agents in their pocketbooks seems to work pretty well. Makes sense to me.
Posted by Mathew Ingram | January 27, 2007 5:41 PM
Posted on January 27, 2007 17:41
Mathew,
There are so many ambiguities crammed in that speech and Q&A, if you know what to listen for…
But if you believe Craig is just a nice guy and he just *happens* to be inconsistent (because he’s not all that bright or something…), I think you are missing a whole lot about craigslist!
But you are definitely not alone, if that’s any consolation…
Delia
P.S. anyways, take care! D.
Posted by Delia | January 27, 2007 10:51 PM
Posted on January 27, 2007 22:51
When a third of an audience in one room raises their hands saying they'd like a reputation system, it means Newmark can no longer claim that he's never been asked for one.
I'm not saying Newmark should cave in and start a reputation system just because his users are asking for one -- he is. He says all the time that he does whatever users ask for. So why is this an exception?
My answer to that question: This is an exception because Newmark is financially dependent on his solution (charging) to his problem (spamvertising).
And his long-term plan is to charge anywhere the market will let him.
Newmark rather enjoys charging businesses for ads because he is anti-business. And he enjoys the idea of taking business from mainstream media outlets by offering ads for free now, only to charge for them later. It lets him throw an elbow at the really big businesses that own the media and then elbow the rich business people who advertise. He sees himself as a Robin Hood sort of figure.
I don't know that Newmark is lying. Rather, I think he fails to recognize the true effects of his actions.
The true effect is to ignore his users in favor of making money and continuing a vendetta against large businesses.
Posted by Lucas | January 28, 2007 11:17 AM
Posted on January 28, 2007 11:17
Lucas,
keep reading Newmark--esp. what he says in the latest Nieman report (sp?) from Harvard. about citizen journalism. You will find some very intresting things there, too (for a guy who's supposedly a "populist.")
T.
Posted by tish grier | January 28, 2007 11:24 AM
Posted on January 28, 2007 11:24
He said his users have never asked him for one. Are you trying to tell me that you think a roomful of media types at a conference qualifies as a sample of craigslist users?
As for Craig's motivation, I'm not sure why you're so keen on pushing the view that he's anti-business and wants to crush large media entities -- since the only evidence for that is your own theory that he plans to roll out charges later, an argument that qualifies as "begging the question."
And charging fees in a few select places to curb spam somehow proves that Craig intends to "ignore users in favour of making money?" The entire history of craigslist proves the exact opposite.
Posted by Mathew Ingram | January 28, 2007 1:43 PM
Posted on January 28, 2007 13:43
re: http://forums.craigslist.org/?ID=18202356
Keep dreaming, Mathew... (and keep repeating what Craig/craigslist says...) Why bother doing some research on it when Craig tells you exactly what he wants you to believe?
I'm giving you just one example of such user requests... (there should be plenty more where this came from, just keep searching for variations on it if you truly want to know what's going on -- the topic has been raised in the feedback forum plenty of times...) D.
Posted by Delia | January 28, 2007 3:20 PM
Posted on January 28, 2007 15:20
Craig Newmark has said on multiple occasions that:
1) Large businesses are inherently inefficient/bureaucratic. He considers Craigslist a model for other companies to follow in staying small.
2) Most large businesses lack a "moral compass."
3) Large businesses and the Wall Street investors who fund them are too greedy. They make more money than they need. Newmark considers Craigslist and himself an example to the business world on why not everything on the Web needs to be 100 percent monetized.
These are all parts of his ideology. And it's a belief system that he has set out to prove to the world. He's more teaching a lesson(s) than he is running a business.
Proving himself requires beating those big businesses. It's not unreasonable to assume large media companies are included among his list of competition, especially considering the entire history of Craigslist.
Newmark also sees Craigslist as sort of a small-time player in the larger world. Craigslist answers a lot of "short-term" needs, he says a lot. The lessons that Craigslist teaches as a business model are what Newmark considers his legacy.
I think it's his tragic flaw. He's so concerned about teaching a lesson that he's forgetting some of his other principles.
You are, of course, free to disagree.
Posted by Lucas | January 28, 2007 4:55 PM
Posted on January 28, 2007 16:55
Oh no, he's stealing market share by offering a better product! Look out children, Craig Newmark is gonna get yoooooooooooooou!
You whiny babies.
Posted by Steven | January 30, 2007 1:23 PM
Posted on January 30, 2007 13:23