How Craigslist Costs Newspapers Money

Allnighterking writes "Well you knew it would happen, Now that eBay has purchased 25% of craigslist, the news is out and suddenly newspapers are claiming that it's costing them money (50-65 million U.S. dollars a year). The original Slashdot coverage is here."

Comments

Irony is more than proper clothes care

[BrynM]

Anyone else find it ironic that this is being reported by Internet Week - an online magazine that has no print version? Maybe it's time the papers realize that re-printing their content online and requiring everything down to maternal shoe size for access is not a great business model. If some large paper, say in a big city like... um... New York had beaten Craigs to the punch or tried to compete in a similar manner instead of being stagnant in a dynamic medium, this wouldn't be a problem. I guess the old way didn't translate very well into a new medium.

Oh.. and Go Josh! Woohoo! Congrats!

ebay... beh

[RealBeanDip]

"now that eBay has purchased 25% of craigslist"

Must of got caught up in the heat of the auction, I heard they only wanted 20%.

This is getting old...

[confusion]

Yet another example of fundamental changes happening to some market segment, and the displaced groups crying. How many times have we seen this?

I can't wait for the NPIA (news paper industry association - there has to be one, right?) to start kicking in doors with the FBI trying to quash the rouge, free exchange of want-ads.

Jerry
http://www.syslog.org/

Cost the Newspapers?

[nathanh]

What a bizarre way of looking at it. IMO a better way to look at it is "newspapers no longer extorting $65 million per year from local residents". Or "$65 million once wasted on newspaper classifieds now available for health, education, other productive uses".

Rather than Craigslist costing newspapers $65 million per year, I think the newspapers have been costing the local residents $65 million per year. Hooray for Craigslist. Boo to the newspapers.

Re:Cost the Newspapers?

[ComputerSlicer23]

First off, let me say this:

You are correct mostly. Your usage of the word "extorting" is over the top, other then that, I'll mostly concede. No one extorted the money from the people. They willing showed up to participate because they felt it was a good value to them. There we no threats on behalf of the paper to publish a persons secrets if they failed to buy enough classified add space. That would be something that starts to close in on extortion by the paper.

However, the newspaper is looking at it correctly from their perspective also. I believe this some what analogous to "opportunity cost" in economics. "Opportunity Cost" in economics is roughly, "I did this instead of that". Think of it this way: In 1965 I invested $2K in a Ford Mustang, instead of investing it in Berkshire Hathaway stock. The Ford Mustang probably has a street value of $50K as a collectible (you should discuss the maintience and storage costs at which point a Mustang is probably a big loss, especially once inflation is accounted for). My guess is that Berkshire Hathaway stock would be worth $~10M. So purchasing the Ford Mustang cost you $(~10M - $50K). If you feel that owning the Ford Mustang over the years had more value to you then having the ~10M dollars in assests today, then purchasing the '65 Mustang was smart. If not, then purchasing the Mustang was a bad investment relative to the Berkshire stock. One important not is their is an opportunity cost either way: one is "I didn't own a really cool car for the last 39 years", the other is "I don't have a 10M assest", the trick is figuring out which one is more valueable to you. Normally, your opportunity cost will involve some type of risk.

You use opportunity cost, and marginal cost (marginal cost is essentially: what is the difference between making Y widgets and Y + 1 widgets) analysis when attempting to come up with the optimal allocation of capital to earn the largest profit. Somewhere along the way, you should include risk in there, but I'm already explaining way too much basic economics in this post. (You use marginal cost to at some point decide when you'd just take $2K to buy the Mustang even if it costs you $10M in assests in 40 years, if I had $200K to invest in 1965, I wouldn't be too upset if I made billions and had a cool car instead of having slightly more billions and walking).

So in that context Craigslist has an opportunity cost on the order of ~65M to various newspapers (it would have been profitable for them to do something that costs less then ~65M to get the business they lost to Craigslist). However, in this case, I'm guessing that the opportunity cost, the marginal cost and the risk probably dictate that the economically smart thing to do was take the ~65M "loss". It would have cost too much money, and tied up too much capital to earn the ~65M in revenue.

This is similar in concept to the advertising agency I read about once. They cut in half their customer base, and doubled their profits (they used to have $30M in revenue, and made $1.5M in profit, they "fired" half of their customers and brought in $12M in revenue, and made $2.5M in profit). Essentially, some revenue "costs" more then others to earn (in this case the marginal benefit of bringing on the additional $18M in revenue, cost the $1M in profit. Ouch!). This is an example of the type of thinking you have to do from an economic perspective to maximize profitability.

I'm not saying the newspaper should make it show up on their P and L, but I am saying, it is the proper frame of reference when discussing what to do about it. If they have a plan that costs ~1M and would get them back ~5M of that, they should consider it (however, if they have an alternative plan for ~1M that would earn them ~7M, they should do that, as not doing it has an opportunity cost of ~2M). If it would cost them ~50M to get ~30M of that revenue back, they shouldn't do it. It's all about revenue, and how much capital it took to generate that revenue (more commonly known as the profit margin). It was probably wrong to call it a loss, but you can't expect the average 8th grader to understand the headline a more accurate headline.

Kirby

Bah

[44BSD]

Any paper seriously threatened by Craigslist would have gone out of business thanks to the invention of toilet paper.

Good - the print media moguls need competition

[waterwheel]

This is all good news. It costs me like $400+ to put a tiny job classifieds ad in the local daily paper. What a ripoff - more than many small shops can afford. Craigslist is what - $75? It's called competition, and the print papers need a healthy dose of it.

The other other reason Craiglist does well is they produce results. I've used other online services to source out staff and contractors and gotten nothing but garbage. The two postings I've put on Craigslist in the past month have netted me numerous qualifed and experienced candidates.

this always happens

[Anonymous Coward]

The Internet pure play always beats the hybrid bricks + e-business because it has a clear strategy. The newspapers can't figure out how to continue to make money on their print editions if they give away the store online, so the on-line content and classifieds are almost never as complete, attractive, or interactive as they could be.

The WP had the right idea, by buying an existing Internet brand (Slate). I think the newspapers are better off buying into fledgeling Internet content sites than trying to start their own. And they need to provide at least nationwide coverage for classified ads.

Check out the comics...

[__aaclcg7560]

No wonder the newspapers are losing money... have you seen how small the comic stripe panels are? Sheesh...

Hm...

[kaitou]

Thats rather sad really. They are claiming lost profit as if it is the fault of craiglist, not just them loosing out in competition.

When have you seen "LA Times blames NY Times for a 30 Million dollar revenue loss"? It makes no sense. It's a (mostly) free market, and Craigslist is in competition with the papers for it. Their model works better, so they get the traffic, and the newspapers dont.

They really have no place to whine here at all.

Re:Here's a newsflash for all you dipshit MBAs

[BrynM]

The "cost of piracy" and "cost of hacking" claims which all /. readers are probably familiar with are just as bad, and are being used to put people in jail now.

You know, last week I was mugged. I was beaten about the head pretty good and had a $300+ item stolen from me at a gas station near my home. According to the Sheriff, "strong-armed robbery" is a misdemeanor. They didn't even want the security camera footage. Now if that same asshole had "stolen" a song, game or movie via file sharing he would have gotten an investigation, time, fines... hell - even a C&D would have been better! Such is the law in this free country.

So what, newspapers are on deathwatch anyway

[Ars-Fartsica]

Read your local lately? You'll find maybe ten percent new local content put alongside 90% of yesterday's wire service stories. This is just a transport mechanism for the dozens of advert flyers that are the real purpose of the paper. LET THEM DIE.

I love this new corporate math.

[aussersterne]

Every American who doesn't give me a dollar right now is costing me the dollar that I'd have if only they'd given it to me.

Thus, Americans' selfishness is currently costing me over $250 million a year, and that lost revenue has a real economic impact; it's money that would otherwise be flowing into the economy when I spent it on myself.

I think it's time that congress got involved.

real irony is the failure of Craig's philosophy

[SuperBanana]

The real irony is that Craigslist tends to be, like Ebay (which was responsible for 3/4 of ALL internet fraud complaints), something you have to approach EXTREMELY carefully.

People on Craigslist tend to be really flaky- we're talking the stoned kind of flaky, or the "I'm going to try and cheat you because I think I'm clever" kind of flaky; I'm not sure which is worse. Then there are all the wierdos posting in the various personals section- if you want a great laugh (no matter your gender), read those sections; makes you think of someone walking into McDonalds with $2 and expecting a rare Filet Mignon with sauteed mushrooms. Or the ever popular "I'm hot. Send a picture. Sexiest one wins." I laughed for about 5 minutes so hard I couldn't breathe, and resolved never to look in w4m again because it was dangerous to my health, even if it was a fantastic laugh.

Top problem though, is that people are complete IDIOTS when it comes to listing their items. "Printer. Best offer." Inkjet? Laser? Dot matrix? Made this decade? God forbid they tell us what company made it. I also love it when useless, worthless stuff is offered up- like cheapo computer speakers. People, I'm all for the recycling bit, but take that shit to the RECYCLING CENTER, don't waste anyone's time putting it up for sale for $5. Round trip subway fare costs at least half that...

The hysterical bit is that Craiglist supposedly has an "advisory committee" that handles how the site is presented to users. When I complained that even basic instructions were never shown to users as part of the posting procedure and it was clear there was a problem, Craig just replied, "thanks, the committee will think about it".

Then there are the people who post the "free" iPod/plasma/whatever emails (which are usually flagged by the community)...the problem is that there's nothing to keep them from posting over and over, because (to my knowledge) there is no automatic blacklist after X number of posts flagged...so spamming is pretty easy.

Then there are the ripoffs. Go read your city's /sys/ for a few minutes, and see how many times you say "WHAT?!"...like people asking $500 for a Pentium 3 system. Go read /ele/ and see how many times you see "Theater Research" speakers being offered for $500; the more honest (or naive) ones admit to buying it from some guys in a white van...the others just think "oh well, I'll get some other sucker to buy 'em".

Classic example of the try-to-sucker-you-by-omission-and-feined-ignorance approach was a Phaser printer being offered for sale for a few hundred $ with no mention of WHY nobody uses wax printers anymore. In short- you MUST cover your ass like crazy. If it's too good to be true, it most certainly is someone trying to sucker you.

Typical, but when you consider it against Craig's motivations (community building and other crunchy-granola-ness), Craigslist has ultimately been a pretty spectacular failure. I used to report at least 5-6 posts a day to the abuse department for various reasons (all were accepted, and the abuse group IS very nice; they ALWAYS write you back! To the CL abuse staff, you have my sympathies and admiration), and I just got tired of it...it was like throwing a sandbag into a levee break and watching it disappear.

I also have a policy now, which I inform sellers of upfront. If the item is different from how it was represented in the post or follow-up emails, both of which I will have with me, I walk out the door- this is after several sellers presented something that was nothing like what they described (like a PC missing half its ram, being sold by a software programmer who played dumb. Riight).

Re:real irony is the failure of Craig's philosophy

[eclectro]

like cheapo computer speakers. People, I'm all for the recycling bit, but take that shit to the RECYCLING CENTER, don't waste anyone's time putting it up for sale for $5. Round trip subway fare costs at least half that...

I think that freecycle deserves a mention to help people dispose of stuff that has too little monetary value to hassle a price with it, but yet want to keep it out of the dumpster. Also, it is helping people out.

Actually, that's true

[cnewmark]

At least, it's what it says on my drivers license, or last week's Newsweek.

Craig

Sorry, not the case

[cnewmark]

We have problems, all right, but we find that the vast majority of folks are trustworthy, and solid.

We get a lot of feedback everyday, to that effect.

Also, we have no "advisory committee". I do have a real good customer service team, of which I'm a part. (I demoted myself from management some time ago.)

Feel free to consider what we're doing a failure, however, I'd guess there's about twenty million others who have a different opinion.

Craig

thanks! and promoting citizen journalism

[cnewmark]

I appreciate the kind words.

We do want to promote the kind of citizen journalism you're allude to in your parenthetical comment. I don't know what that means yet, but I've chatted a little with the ohmynews guys and Dan Gillmor, and will figure out something.

Craig

Sorry, for brevity, tired...

[cnewmark]

I didn't enjoy someone misrepresenting what I said.

The deal is that we work on continuous improvement, and obsess about customer service. That's what I'm focusing on at the moment, trying to shut down a coupla spammers targeting our posters; also, dealing with some bickering in our discussion boards, and working with badly behaving apartment brokers in NY. (That's my biggest single project, and it looks like we've had some luck getting them to avoid sleazy behavior... but this will take me personally another year or two.)

I'm tired, and want to get back to Quicksilver, and wondering if I'm smart to try out Xandros.

Craig