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Craigslist Eyed for Possible Future IPO
An anonymous reader writes "Eric Hellweg wonders if everyone's favorite want-ad site will join the ranks of eBay, Amazon, Yahoo, and, yes, Google. Hellweg guesses it makes $25 million a year by charging for only 12 percent of its ads. If it ramped up payments on more ads throughout its many-city network, it could hit $100 million. That's a monster margin for a 14-person staff! And they may even consider going public."
When you're raking in that much cash, why go public and turn over control of your company to shareholders? If you just want cash, sell the whole company.
ON DELETE CASCADE
Or is Craigs List the ghetto of the internet? It's always appeared to be fairly trashy to me with it's ugly ameturish interface and rampant crappy advertising.
AccountKiller
Craig's List was great because it spread by word of mouth. The community had accurate ads for good values. Also, every user I ever heard of, on either side of any transaction, was encountered almost like a "friend I hadn'y yet met". That kind of transitive trust within the community will be exploited, and destroyed, by the IPO frenzy. If there's even any left now that it's been front page news on Slashdot.
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make install -not war
It's precisely the ads that no one would bother to post if they had to pay which are the reasons I read craigslist.
Sometimes advertisers charge a fee to raise the bar to keep quality up -- like a coffeeshop requiring a dollar tip to the waiter to post a flyer, to keep the place from being plastered in Christian rants. With some forums, it's exactly the opposite, if you charge the good stuff leaves. For example, if I couldn't set my viewing level to -1, I'd miss the good stuff on slashdot.
It seems OK to continue to charge the SF area though. Those people basically pay to breathe, if they are dumb enough to keep paying California taxes and cost of living, they might as well subsidize one of my favorite websites too.
The thing is, as a business owner, why would I want to dilute my investment in a business by going IPO? Wouldn't I want all the profits for myself? And, did everyone forget that the purpose of owning a business is to make money by profit, rather than making money through share trading?
IPOs are pointless if you're already a massively profitable business and if you don't need anymore investment in your business. You *MIGHT* gain some return by going public, but that's not going to be likely in todays market...
No seriously... what capital projects could they be planning that they would need an equity offer for? If the company is generating ~$2M/employee right now, I am willing to assume that they are making a fine profit and should be able to present a strong enough balance sheet to either get loans or simply pay for a reasonably-sized project without any debt or equtiy.
At least with google there's a scale issue as they add more features/services and attempt to attract a larger userbase. Is Craigslist moving toward doing the same?
As someone who used craigslist when it was a (gasp) email list, and also lived on the same block as the cl headquarters for 3 years in SF, this article is utter nonsense.
The whole point of craigslist is the micro-personal connection of real people, in close physical proxmity, buying & selling stuff. I've known a great many people who've purchased, sold, and gave away: airline vouchers, couches, desks, etc...
Even while living in SF during the dot com boom and bust, I know virtually nobody who ever got a job off of craigslist. Further, nobody in their right mind would use craigslist to find a home to purchase...
Oh - and back to the basics - craigslist expands thru word of mouth. How do you suppose they would charge for any of the garbage this tech-moron suggests? A great feature of cl is that you can include html in your posts - good posters often do, and include images, formatting etc... design resumes often include good css styles, images, and look pretty darn sweet - try that on hotjobs!
So, this guy thinks that without additional cost/strain/staff they're going to just quadruple his totally BS estimate of their revenue?
Why would they want to go public anyhow? With only 14 staff, and no reason to buy-out other companies or invest in serious R&D, does it ever come to mind that a businessperson with a small company making serious $$$ might just want to keep it that way?
Lets start with Yahoo. How do geeks and nerds see Yahoo? A wealth of information? Or just a pile ads with some search results in the middle?
Google? Well, I have noticed as well as others have the current search results have not been as good as before.
It seems that greed and advertising always tarnishes everything it touches. It will be interesting to see what the 14 staff memebers of CL.com decide to do with their up and coming fame.
Good luck.
Useless sig.
In an IPO, you are selling your whole company, to the public (that's the "P"). Except for any part you hold back. And you can sell that later, while all the equity is price inflated by the IPO hype^Wadvertising. Sounds like a better deal than just selling the keys to the building to one private buyer.
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make install -not war
want an ipo. Lets say Craiglist is making 25 million a year in profit and they file for an ipo. So what will the market capitalization of the company? Most likely some where between 250 million (p/e of 10) to 2.5 billion (100 p/e which is about yahoo p/e ratio) depending on how fast people will think your revenue will grow. By ipoing you can get the next 10 years of profits now. There are tons of details (ie founders have limits on how fast they can dump stock) but effectively you can get the next 10 years of profits now and the best part is you don't have to work for the next 10 years.
Personally I think they will have problems charging for a lot of thier services. The reason people use CL personals is because they are free not because it is a great service. Same thing for a lot of other categories where people are trying to get rid of junk
BTW It is the VC which prcess really founder equity more thab ip process.
What the fuck is up with people spelling "article" as "artical"? Jesus Christ. Learn to spell simple words.
Craig Newmark is an awesome human being. Check out his blog. He's not only an open-source software user (SuSE on a Thinkpad T40) and the creator of the largest and most useful (and OSS-based) community bulletin board in the world, but also a progressive Democrat and all-around humanitarian.
Comment removed based on user account deletion
The article is a speculation about what might or would happen if Craigslist did go public. The Craislist CEO points out that, "We have no plans to go public." So, I'll be really disappointed if people post things claiming the Craigslist is selling out, because that would mean that you didn't RTFA.
Well Craigslist finally made it to Indianapolis, and it sucks. The only buy/sell ads listed are SPAM. Perhaps this could change in 5 years, but doubtful.
I use CL NYC quite religiously, found my apartment, couch, vacuum, and even a few surprisingly good dates there (no really). I've surfed it daily, and placed one or two ads, never once have I seen a paid advertisement or been asked for money. There's a lot of gak to sort through, but you can find what you need if you search right. So... how are they making 25 mil a year?
If all the world's a stage, who's buying tickets?
never drink kool-aid from a big vat
Not to mention that there is a lot of competition on the internet.
http://www.traderat.com
http://www.mjmls.com
I personally like tradeRat.com, because it allows me to list my garage sales and sell within my neighborhood, saving me shipping $$$.
Why is it news when a stupid columnist points out the obvious? Yeah yeah, the craigslist people could make a lot of money if they chose to exploit their site as much as they could. But they've shown no interest in doing so. If that every changes, then we'll have a news item.
This is a big contrast to the traditional purpose of an IPO: raise a lot of capital to finance some business need.
This seems like an interesting new approach.
Craigslist has pretty much made moving to a new city bearable, and I didn't have to put up with the commericial bullshit on other sites. If Craigslist dies (which it would were this to happen), I would be willing to invest my time in creating a new non-commercial craigslist-ian type site so I could give back what it gave to me.
I'm not kidding either, I got my current job through Craigslist and my apartment. I didn't get any responses from any of the crappy commercial job posting sites and the apartment results sucked from other sites.
Anyone willing to make a new craigslist when (it's only a matter of time, let's be realistic) craigslist either dies or kills itself (IPO).
I dunno about anyone else, but I got pretty worried when they expanded to new cities, I figured the more exposure it got, the chances of it becoming commercial became greater and greater.
We charge employers $75 to post a job ad in San Francisco, and $25 in LA and NYC. In fact, we only started charging for NYC and LA this past week. Every day, there are hundreds of job ads just in San Francisco. It's a (very) decent chunk of change. Sean @ CL
Ah. Did someone move the rock or did you crawl out on your own?
http://www.craigslist.org/ is the site. You type in Craigslist.com and you end up at the former, just as you say. That's the place. Simple and elegant, eh?
By the way, George W. Bush is President and California is now a state of the union.
Anything else we can clear up?
So, they get $250 Million cash. What do they do with it? If they are lucky they can invest it in shares that returns a steady $25M pa ... i.e. what they started with. At the same time, they have dipped out on the opportunity to grow the company from one that returns $25M pa to a $250M or $2.5B pa.
This might make sense if they thought that the long-term growth and profit prospects were poor. However, the fact that the VC's are sniffing around is indicative that prospects for growth in particular are actually pretty good.
If they simply wanted to get out of the grind, they could hand over management responsibility to someone else ... like Bill Gates has done. If they get a good CEO, the money will roll in regardless. AND, the CEO won't have to keep looking over his shoulder at the stock price. Which will be more conducive to a sound long-term strategy.
BTW It is the VC which prcess really founder equity more thab ip process.
Sorry, I can't parse that.
I think the really interesting thing about this is that the web pages that are really successful in the new web (post bubble) are ones that are super stripped down and basic. Google and Craigslist two of the main sites I use. Blogs and blogging are big. Slashdot has basically the same design as ever, with the exception of the top banner ad. It seems that people didn't end up wanting lots of complexity in their web sites.
The printed word ends up (again) being the most important thing out there. It goes to show that you don't need heavy-duty graphics and don't want flashy ads if you're delivering on content.
-- Bird in the Bush: The Renewable Energy Blog http://www.birdinthebush.org
Until now I thought Craigslist was nonprofit, but I guess not. Its "mission and history" page seems to support that: "After being approached toward the end of '97 about running banner ads, he decided to make craigslist non-commercial. 'Some things should be about money, some shouldn't, and I make enough doing contract programming.' He was joined by other folks who proposed running face-to-face parties to make the sense of virtual community more physical, and who proposed creating a nonprofit foundation as part of craigslist." Also, the author of that article didn't mention that craigslist also charges for rental and real estate listings posted by agents.
The author lives in a dream world: Craiglist isn't nearly as popular as eBay, google, etc. Until recently it didn't even cover my city of 2.5 million people and even now it only has a whopping 290 housing listings and 156 jobs. Sorry Craigslist, but you have a long way to go before you reach the ranks of eBay or Google, might be great if you live in San Francisco but the rest of us are left in the cold.
my karma will be here long after I'm gone
The key bug in your argument is the "except for any part you hold back." That amount is typically at least 70%! And selling off the remainder is difficult (sends bad signals -- lemons theory).
But in the meantime, you would get to give away 8% or so of the money raised to a fatcat banker, get to personally certify your financial statements (Sarbanes), and get to field phone calls from investors, analysts, and everyone else in the public market ecosystem.
IPOs are not the bed of roses most people assume them to be.
It's no bed of roses - that sounds more like a grave :). The IPO is the cradle; that's what the "I" stands for: "initial". Holding back is no bug - because the bigger demand of the public market increases the value of the still limited supply of shares, the amount held back can be much greater than the value of the total to a single private buyer (lower demand).
Selling off the remainder after a successful IPO is the name of the game. Insider trading has SEC rules, "golden handcuffs" agreements with other investors, and can affect the demand by signalling the market. But insider traders make lots of money selling their retained stake - and buying it back, then reselling it, when that's their best bet in the market. Sounds like work, including the other reporting requirements, but the work is very profitable, so it justifies hiring receptionists, accountants, PR people, etc. They field the phonecalls. Sarbanes and other disclosure rules are actually probably less invasive of privacy than they need to be to protect the market from racketeering. It's not winning the lottery, but played smart, an IPO is much less hassle than it is yachting.
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make install -not war
Basically, we work to get established in a particular region and after we hit a critical mass (posts in general, users, spam), we introduce paid job postings. There's the obvious profit for us, but also just as important is that this cuts down a lot of irreputable job posts, increasing the overall quality of that category. Like in SFO, there's a big drop of postings right after the charging starts, but it picks back up with in a couple months (and ends up significantly stronger).