Craigslist and its Business Model

 
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.



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Case Details:

Price:

Case Code : BSTR340 For delivery in electronic format: Rs. 500;
For delivery through courier (within India): Rs. 500 + Rs. 25 for Shipping & Handling Charges

Themes

Business Models / Business Model Innovation / Social innovation
Case Length : 26 Pages
Period : 1995-2009
Pub Date : 2009
Teaching Note : Not Available
Organization : Craigslist, Inc.
Industry : Online Classifieds
Countries : USA; Global

Abstract:

This case is about Craigslist, Inc, one of the leading providers of online classified ads in the US. Founded in 1995 by Craig Newmark (Newmark), Craigslist is an online community featuring free online classified advertisements related to jobs, housing, sales of a variety of products and services, gigs, resumes, discussion forums. As of May 2009, Craigslist offered local classifieds and forums for 570 cities in 50 countries worldwide. It generated over 20 billion page views per month and as many as 50 million users visited Craigslist each month. These included more than 40 million in the US alone as of March 2009.

The case discusses Craigslist's low-cost business model and the non-commercial aspects of its business that the company promoted.

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The main objective of the Craigslist business model was to satisfy the users and provide a service based on trust and simplicity. The company said its goal was not to maximize profits but to offer localized service which was free as well as convenient for users. Craigslist offered free service to all its users except in certain cities like San Francisco, Los Angeles, and New York where it charged a nominal sum for recruitment ads and for brokered apartment listings in New York City. According to some analysts, Craigslist's business was non-commercial in nature and Newmark perceived it to be a community-based model rather than a for profit business. The website of the company was simple with no frills, similar to the classified section of a newspaper.

The case also discusses the criticism faced by Craigslist for promoting violence and illegal activities on its site. In particular, its erotic services category attracted a lot of criticism and scrutiny from regulators in the US. Craigslist was dogged by controversy after crimes were reported nationally following contacts made through postings on the site. After that, the company tried to closely scrutinize postings on its website and replaced the erotic services category with an adult services section. The case concludes with the future challenges for Craigslist. Experts pointed out that the biggest issue for Craigslist was controlling spammers and scammers. In order to stay in the competition, it was important for Craigslist to overcome the problems which continued to plague the site, they said.

Issues:


Analyze the online classifieds market in the US and study its effect on the newspaper classifieds business.

Evaluate the low-cost business model of Craigslist.

Understand the reasons behind the success of Craigslist.

Study the criticism related to some of the services offered by Craigslist.

Identify the challenges faced by Craigslist and explore strategies that the company might adopt to overcome these challenges.

Contents:

  Page No.
Introduction 1
Background Note 3
The "No-Frills" Site 6
Low-Cost Business Model 7
Non-Commercial Aspects 9
Competitors 10
Accolades 13
Criticism 14
Outlook 17
Exhibits 20

Keywords:

Business model, Business model innovation, Low-cost business model, Laissez Faire business model, Open source technology, Non-commercial, Community-based model, No-frills, user experience, Unique visitors, Page views, Erotic services category, Online classified, General classified segment, Craigslist, eBay, Kijiji

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