How Craigslist Works

Each craigslist site focuses on a specific community. Originally, craigslist only listed classifieds and announcements within San Francisco. As the service grew in popularity, expanding well beyond founder Craig Newmark's original concept, craigslist added other cities to its network. The first city to join the network was Boston in 2000. A couple of months later, Chicago, Los Angeles, New York City, Portland, San Diego, Seattle and Washington, D.C. followed suit. Today, more than 450 cities have a craigslist community site.

Because community members largely moderate the sites, craigslist employees can focus their attention on coordinating transactions for job and housing posts, helping members troubleshoot problems and responding to reports of abuse or illegal behavior. Without communal moderation, the craigslist staff would be severely overworked.

According to craigslist's fact sheet, every month craigslist has:

The executive team at craigslist maintains that the reason for the site's success is the user community. The team believes that craigslist gives users a place to communicate and help one another, fostering community spirit. The site's emphasis on community reflects its founder's and CEO's values -- Craig Newmark and Jim Buckmaster try to avoid commercialism and corporate culture in their company [source: craigslist.org].

Craigslist communities appeal to a broad range of users. The simple, organized layout and helpful search engine makes navigation easy. Craigslist members range from teenagers to senior citizens. They post on the forums, shop online, trade tips and make new friends. While the site itself may not be the most visually interesting Internet destination, there's no denying its effectiveness. Users often report that it's easy to find what they are searching for within a few minutes of logging on to the site.

In the next section, we'll examine how the corporate structure at craigslist sets the tone for the entire site.

Craigslist started as a pet project but blossomed into a full-fledged company. In 1999, craigslist incorporated as a for-profit organization. The company also purchased the domain craigslist.com to prevent anyone from buying it and misleading craigslist members. Each year since then, craigslist has expanded to cover more cities and communities, becoming a powerful financial force in the process.

Craig Newmark and Jim Buckmaster aren't your typical corporate bigwigs. Even though Newmark is the founder and chairman of craigslist, he states his title as customer service representative. Buckmaster is not only the CEO but also a lead developer for the site. He helped design the homepage, Web architecture, forums, community moderation system, personals category and search engine.

Newmark and Buckmaster strive to keep craigslist a service-based company focused on online communities. They have refused offers to sell the company for a huge profit. Many of their decisions fly in the face of traditional business strategies, but Newmark has said that keeping the communal culture of craigslist intact is more important than making enormous profits [source: craigslist.org]. Even the site's offices are unusual for an Internet company -- instead of a flashy office in a building made of glass and steel, craigslist's headquarters are in an old Victorian storefront in San Francisco [source: Associated Press].

The site earns revenue by setting fees for job postings in a few cities and for apartment listings in New York City. The job posting fee in Boston, Los Angeles, New York City, San Diego, Seattle and Washington, D.C. is $25, while the fee in San Francisco is $75. The fee authorizes the user to post a job in one category -- if the user wishes to post the same job in multiple categories, he or she must pay a fee for each one. The apartment listing fee in New York City is $10 per brokered apartment rental ad. Job and housing ads in other cities are free.

The site generates enough revenue to support its entire staff of 25 people. The company doesn't publicly release its financial results, but estimations range in the millions of dollars -- $7 million for 2003 and more than $20 million in 2005 [Business Week, c|net News].

Apart from paid classifieds in the aforementioned cities, craigslist features no advertising at all. It doesn't sell advertising space for banner ads, pop-up ads or any other kind of web advertising. Newmark says he doesn't intend to use any kind of web advertising on craigslist in the future [source: craigslist.org].

Though craigslist's corporate philosophy focuses on making a positive impact in the community, not everyone using the site shares that point of view. Some craigslist members use the site to take advantage of other people.

In the next section, we'll look at some of the controversy surrounding craigslist.

One of the biggest challenges for the craigslist community is weeding out scam artists. The site has a section describing common scam tactics and what users should do if they come across them. Scams might involve fake money orders or checks, bait-and-switch schemes (in which you think you're getting one thing but end up with another), phishing schemes designed to obtain personal information, identity theft schemes and other unethical and illegal activities.

One scam that has popped up in several craigslist communities involves a buyer overpaying for an item. In this scam, an innocent seller advertises an item on craigslist for a given amount -- say $1,500. An interested buyer contacts the seller and says he'll send a check for the item, but when the check arrives, it's written for a much larger amount. When the seller contacts the buyer to inform him of the difference, the buyer apologizes and explains that he wrote the wrong amount after confusing it with another purchase. He tells the seller to deposit the check and wire him the difference. What the seller doesn't know is that the check is a fake, so he cashes it and wires the difference to the buyer. Once the bank researches the check and discovers it's a fake, the seller is held responsible. The scam artist has his money, and the innocent seller takes the blame.

Police scan craigslist for ads soliciting illegal goods or services. Newspapers have featured several stories about cops busting prostitution rings after finding them through craigslist. Papers have also published stories about police using craigslist to find sexual predators. In October 2007, craigslist made headlines after a member posted an ad for a babysitter and then killed the young woman who responded to the ad. In craigslist's defense, Buckmaster has said that newspapers are more likely to report negative stories about the site, possibly because some business managers feel craigslist robs papers of revenue [source: The New York Times, Associated Press].

The terms of use on craigslist make it clear that the site has nothing to do with the content users post, that it will work with authorities in cases involving illegal activity and that violating the site's terms can result in stiff fines. Users posting to craigslist must first click on a button that says they understand and accept the terms of use. Even so, when members use the site for illegal or unethical purposes, some people try to hold craigslist responsible.Craigslist's terms of use include a long list of forbidden topics and language, including: Abusive, unlawful, discriminatory, harmful, harassing, defamatory or libelous language Posts that reveal someone else's private information Job posts that violate Equal Employment Opportunity laws Housing posts that violate the Fair Housing Act Posts that impersonate someone else, unless the post is a nondeceptive parody of a public figure Scam ads Ads that advertise illegal services Posts that include computer viruses or other harmful computer code

To learn more about craigslist and other topics, follow the links on the next page.