Ebays Original Business Model Case Study

9.15 Craigslist.Org

Craigslist is a network of online communities that offer online classified advertisements. Sections are devoted to jobs, housing, personals, for sale, services, community, gigs, résumés, and discussion forums.

The service was founded by Craig Newmark in 1995 as an email update for friends on local events in the San Francisco Bay Area. A year later it became a web-based service, and started covering other classified categories. In August 2004, eBay bought a 25% stake in the company from an original partner. Expansion to other US cities began in 2000, and today the classified listings serve most countries in the world. Spanish, French, Italian, German, and Portuguese language support was added in March 2008. {21} Maps from OpenStreetMap (rather than Google) were added in 2012. {24}

Illegal and inappropriate postings are identified by a customer flagging system, and the Flag Help Forum is an unmoderated volunteer community, not affiliated to, and not staffed by, the company. The site has always posted help connections for lesbians and gay men, but its advertisements for erotic and adult services have been gradually phased out.

The site is immensely popular. Alexa figures for August 1st 2011 were: Alexa traffic rank 34, rank in USA 10th (behind Tencent and Twitter respectively), sites linking in: 10,622. Over 80 million new classified advertisements (over 20 billion pages) are viewed each month. {21}

Craigslist is a private company, but, as far as can be ascertained, has some 30 employees in the USA, three main owners (Craig Newmark, eBay and original partners), and pulls in some US$ 100-300 million annually. {20} {25}

Business Model

The model is an extremely simple one. Craigslist charges for ads in selected cities: $75 per ad for paid jobs the San Francisco Bay Area; $25 per ad for paid jobs in New York City, Los Angeles, San Diego, Boston, Seattle, Washington DC, Chicago, Philadelphia, Orange County (California) and Portland, Oregon, and $10 per ad for apartment listings in New York City. Similar ads in other areas, and ads in other categories, are free. No charge is made for a successful sale or contact.

SWOT Analysis

Strengths

1. A well-known and trusted brand.
2. Large revenues from a simple business model that clearly works.
3. Small, tightly-integrated company.

Weaknesses

1. Not compatible with modern platforms (smart phones, iPads and other tablets.)
2. Usefulness declining with increasing spam.
3. Site is now cluttered and not easy to navigate.
4. Help forum is idiosyncratic and unhelpful.

Opportunities

1. Craigslist could more effectively monetize their services, probably increasing revenue by an order of magnitude.

Threats

1. Craigslist could be made liable for content. {15}
2. Google's many competitively-priced services (e.g. Google Base).
3. Integrated Apple services (iPod, iPhone, iPad, and their applications).
4. Look-alikes that improve on Craigslist's current weaknesses.

Points to Note

1. A simple business model that has seen no need to evolve.
2. Successful models can be simple.
3. Craig Newmark apparently wants to remain in control, i.e. still 'own the company', rather than the 'company own him'. {17}
4. A 90s look to web pages: plainness equates with honesty.

Questions

1. What is Craigslist, and why has it been successful?
2. Apply a SWOT analysis to Craigslist.
3. Do Craigslist sites need a facelift? What would you suggest?

Sources and Further Reading

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CMIS3350 Diya Alwan, Crystal Willette, Lacey Grandjamb, and Hanan Abouon eBay Evolves Case Study 1) Contrast eBay’s original business model with its current business model. eBay’s original business model mainly focused on auctions. It also consisted of two types of revenue models:  Advertising Revenue Model:-Incur fees on investments  Transaction Revenue Model:-High listing cost-Low sales commission In contrast to it’s original business model, eBay’s current business model is more focused on fixed price goods and their revenue is derived from other acquisitions such as PayPal, Star Hub, and Gumtree. The current business model also consists of the same two revenue models:  Advertising Revenue Model  Transaction Revenue Model:-Lower listing fee-Higher sales commission-No listing fee for smaller sellers 2) What are the problems that eBay is currently facing? How is eBay trying to solve these problems? eBay was faced with the following problems:  The first problem that eBay faced was the introduction to the VoIP service which provides free or low cost calls over the internet. eBay’s sellers were not interested in adding voice calls to their business models.  The second problem that eBay encountered is foreign affairs. The company was not able to keep up with the different laws in each country. For example, the auction site called Tabaco in China.  The next problem was the honesty and integrity of the auction following a customer servicer problem. If they created a customer service department, it would take away from their profits and their investors would be concerned and possibly opt out. In order for eBay to eliminate these problems, they have expanded and added more measures of protection such as purchase protection and vehicle warranties. eBay created a dialogue for their consumers to voice their opinions by constructing a section on their website for customer to write their comments. Another attempt eBay took was making sure fraud from

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