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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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.
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
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.
» 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.
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
Craigslist and its Business Model
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