How does Craigslist make money? [Revenue Model]5 min read
How do classified ads websites like Craigslist make money? Many show display ads, but Craigslist isn’t following that practice. You don’t see any ads, and you can even post your classifieds for free. So, what’s the catch?
I got reading up a bit and it wasn’t too hard to find. So let’s understand what are the revenue sources for Craiglist, how much money it makes, and its business model in detail.
How does Craigslist make money?
Craigslist makes money with paid posts. Craigslist charges a posting fee for job posts, real estate sales or rentals, vehicle sales and a few other high sale value categories. The cost for these posts range from $3 to $75 depending on the area. Posting ads in other categories is free of cost.
Let’s see how Craigslist started and what was it like when it first began!
What is Craigslist?
Criagslist is one of the most well-known, and probably the largest online classified ads network. It boasts over 20 BILLION monthly page views which puts it at the 72nd position in the world’s largest websites!
Craig Newmark founded Craigslist in 1995 as an email distribution list to friends.
It featured local events in the San Francisco Bay Area. For Craig, it was a hobby project just like WhatsApp was for its founders, before it grew beyond their wildest imaginations!
In 1996, Craigslist.org was launched as web service and from there on began its journey to being one of the top classified ad networks in the world. Craiglist is now available in over 70 countries and in multiple languages
How was Craigslist monetized in beginning?
When Craigslist was launched online, the internet culture was non-existent.
So, the possibility of the website picking up any traction was a far-fetched idea.
But by 2000, a lot of online companies had started out and craigslist picked up pace.
In 2001, Craig Newmark decided to convert his “website” into a company and named it Craigslist Foundation which was registered as a 501c3 non-profit organization.
Craigslist’s goal was to help local businesses across the globe to promote their products, services, and events to other members of the local communities.
The company was able to sustain its operations through donations and received multiple donations over the course.
How does Craigslist make money now?
At present, Craigslist has a single major source of revenue – paid posts. While they stuck to their main idea of helping communities spread the word about local events, Craigslist had to find ways to sustain the number of visitors on the website.
So, they decided to charge a small fee per post for a specific category of ads. Here’s a list of the fees that craiglist charges for specific categories of ads:
- Job postings in US and selected CA areas—$10-75 (fee varies by area)
- Apartment rentals in Boston, Chicago, and NYC areas—$5
- Commercial real estate in the US—$5
- All for sale by-dealer categories in the US—$3-5
- Cars/trucks by-dealer in the US, Vancouver BC—$5
- Furniture by-dealer in Vancouver BC—$3
- Cars/trucks, RVs, and motorcycles by-owner in the US—$5
- Gigs in US and selected CA areas—$3-10
- Services in US and CA—$5
The above may seem small numbers, but Craigslist earned $694 million in 2016. This makes it one of the most profitable classified ads websites in the whole wide world with a profit margin of 80%+ due to the nature of the business.
Along with that, Craigslist never decided to scale their operations and has continued to operate with <30 employees!
That’s one lean business!
What was Craigslist’s marketing strategy?
I have multiple websites and it would be interesting to know what Craig Newmark did to grow his website to such a large scale. Well as unsurprising as it sounds, he did just two things right (accidentally?)
- Craig created the website to help his friends know more about the events happening locally. Since there was no commercial intent behind the website, the word spread out more effortlessly
- Since the events and classifieds posted on the website had mass appeal, it got shared around much more than other websites.
Essentially, Craigslist grew because of the viral effect, way before it was common. The website gained a lot of word-of-mouth publicity from both the people who posted ads, and the people who bought products from there.
FAQs about Craigslist’s revenue model
While Craigslist initially started out as a non-profit organization, it is now making profits through paid ads on the website. The rates range from $3 to $75 depending on the category of the ads. The revenue generated from these paid posts accounted for $694 million in 2016 making craigslist one of the most profitable classified ads website in the world.
According to estimates, Craigslist earns about $1 billion annually. This estimate is about 50% higher than the $694 million revenue from 2016. This shows that Craigslist has continued to grow YoY.
Most ads on Craigslist can be posted for free. The company charges a small fee from $3 upto $75 per post for job posts, product or service offerings, real estate rental and sale, etc. These fees cover the costs of running Craigslist.
As per the traffic statistics, Craigslist is losing popularity and has seen reduction in monthly visitors from 50 billion to 20 billion in the recent years. This can be attributed to the fact that Craigslist has stayed the same since 1995 while most new websites are more visual, Craigslist focuses on text-only ads and doesn’t seem to want improvement.
Craigslist allows users to post ads about products or services, local events, garage sales, reselling of used items, jobs, real estate rentals and sales, and much more. As most ads can be posted at no cost while the ones that need to be paid for offer good visibility, Craigslist has gained popularity within local communities that it serves (now global).
As per Forbes’ estimation, Craig Newmark’s net worth is $1.3 billion based on the 42% ownership in craigslist.
Craigslist is a brilliant platform. It goes to show how such an insignificant idea can go so big. If you enjoyed reading this writeup, I’m sure you’ll also love to read more about how Discord makes money and how DuckDuckGo (DDG) makes money.