June 25th, 2012

A Stroll Through the Craigslist-Crusher Startup Graveyard

I’ve been thinking about hopeful Craigslist-crushing startups this weekend as a result of all the Padmapper drama over the past few days. Padmapper is my #1 site for apartment hunting and I really sincerely hope that Craig and Jim will at least consider coming to some sort of agreement that is beneficial to both. Even if they don’t come to an agreement, I am optimistic about Padmapper’s future because Eric is super talented and will figure it out.

This post isn’t about Padmapper though, it’s about all the startups you don’t read about that have struggled over the past however-many years because of this Craigslist-can-be-killed attitude that is pervasive in startupland. While I don’t doubt that perhaps the right person will come along someday, I also think that the formula for killing Craigslist will require so much beyond software alone (sorry nerdos) and will be a piecemeal game.

While a handful of companies like AirBNB and TaskRabbit have made some progress in their particular areas of focus, Craigslist is still incredibly dominant in the following 4 areas: selling used items, apartment search, roommate search, and jobs (other than the IRL task-focused jobs that TaskRabbit has cornered). Coincidentally these are also all the areas where craigslist makes their money.

Why do so many startups focused in the above four areas generally flounder? Here is my hypothesis: startups are failing most on the seller-side because of their inability to provide qualified buyers. Everyone has their own theory on 2-sided marketplaces and mine is as follows: if you provide a seller with a pool of qualified buyers, and a transaction happens, they will continue to sell through you. Otherwise, they will go elsewhere.

Over the past few years, I have done every one of those 4 things listed above as a seller. I have listed apartments, a roommate ad (that led me to one of the most awesome roommates ever), found several interns, and sold countless items – electronics, furniture, etc.

As a lover of startups, I will often list items on multiple platforms just to see if anyone is making a dent. C-list *ALWAYS* wins on pretty much all criteria: volume of responses, best price, best candidates, people who mostly reliably show up and always pay cash. Now look, I am not saying that Craigslist is free of sketchballs and criminals. That would be naive. What I am saying is that, from a seller’s perspective, I will take spammers, flakes, and weirdos any day of the week so long as you are bringing me legitimate buyers/options.

Nothing is worse than crickets. NOTHING.

If you are trying to compete with Craigslist in any of the above listed categories, you have to make life amazing for the seller. If that means driving a truck around “buying” couches and bookshelves and iphones for a year, consider it the cost of user acquisition.

I think we need to collectively get over the knee-jerk “problems” with craigslist:

1. that a new UI is the answer (it’s not…though maps on apartment listings would be <3 <3 <3)

2. that making the listing process “seamless” will make users switch (it won’t…the listing process is already seamless)

3. that sellers want better tools (this is party true. but what sellers really want is buyers, and they are not willing to sacrifice buyers for better tools)

4. that you can be competitive through software alone – you need SERIOUS community-building skills, potentially paid acquisition ($$$) and maybe even a logistics mastermind

I love startups and genuinely would love (and use!) a better solution.

But to be honest I kinda just want to sell my stuff and be done with it.

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  • http://www.aweissman.com aweissman

    I read this as you saying that, with any marketplace, you need liquidity. Without that, a market  just will not work. Period.

  • http://www.aweissman.com aweissman

    I read this as you saying that, with any marketplace, you need liquidity. Without that, a market  just will not work. Period.

  • http://amandapeyton.com amanda peyton

    Yep – exactly. 
    More so, I believe that liquidity can be faked until it's real. But it has to seem real to the seller.

  • http://www.aweissman.com aweissman

    How do you think liquidity can be faked?

  • jcdavison

    no way to 'fake' liquidity unless the company acts as the counter party

  • http://amandapeyton.com amanda peyton

    exactly. i think that the company acting as the buyer is a way to bootstrap/fake liquidity. for example, when reddit started they created bot accounts to fake site activity until it picked up (which happened really quickly). 

  • Darin

    Just a heads up: Craigslist Killer is probably a misleading term for the title of this article. It happened right near me, so I thought it was obvious, but Google it. 

  • http://qcircles.net/ Jeff Jenkins

    I talked to someone last night at the NY Tech Picnic who was making an app which let you set up a single-item sale which you could then embed or post to social media.  It built in accepting payments, which was interesting.  I think it's going to have trouble exactly because of the problem you're describing here (unless you already have wide distribution channels available to you)

  • http://amandapeyton.com amanda peyton

    oh WOW I totally forgot about that, you're right. I changed the title to “Craigslist-Crusher”

  • lexein

    Schadenfreude led me here via hackerne.ws, hoping for an actual long list of doomed hopeful Craigslist-crusher startups… More, please?

  • http://hegranes.com/ jonathan hegranes

    Before selling last fall, I was hoping to be one of the Craigslist Crushers… Liquidity is a definite problem, but even more so from my perspective was that enabling the ability to tap into past successes.

    For example, some routine posting might happen in your neighborhood and that listing gets filled quickly. Other people from that neighborhood don't realize they can enjoy a similar transaction. Especially for more unique listings, there could be a really cool posting, but once it's filled, there needs to be a way to build community around those past successes.

    Ebay did this really well in its early going. I think it's a key element for the Craigslist Crusher hopefuls…

  • Wei Yang

    Yeah, honestly it's all about the volume. No amount of technology will trump volume and results.

  • http://twitter.com/Digimixus DigiMix Marketing

    Is real estate the highest volume traffic source for Craigslist?

  • http://twitter.com/sshreibati Sammy Shreibati

    It's really sad that Craigslist doesn't innovate BUT I don't understand the need for CL to fork over their data. 

    They have built a community and a destination site for rentals/sales and if PadMapper is better solution they should built it (which they have) and get users.  

  • jusben1369

    I came here wondering if there was anything worse than crickets. Thank you for answering that so definitively. ;-)

    Craigslist fascinates me. It sort of like a backwater on the Internet – like a communist or socialist managed economy. By being free and initially capturing critical mass it has created this deadend/blackhole for real innovation. I agree that people like yourself and millions of others are buying and selling things they same way they have for the last 10 years.

    that sellers want better tools (this is party true.) 

  • http://pulse.yahoo.com/_C6L6KOPNY25HOFEMIW2PBHXQEA HermanG

    Good observation

  • http://hegranes.com/ jonathan hegranes

    I don't recall where I found this, but it used to part of a presentation I have… Good example of the many startups going after various parts of the marketplace. (note, this is a few years old)


  • http://iq.callme.io/ Chris Bracken

    Speaking from the seller point of view (my company uses c-list across the country in recruiting), the user interface, the pain in the butt payment processing, etc. is worth it with the high-volume response rate. That being said, somebody…please make it better! 

  • http://robmillis.com/ Rob Millis

    another saving grace for @craigslist: newspaper classifieds didn't change for 150 years. if it ain't broke…

  • Wojtek Poppe

     Hey Jonathan, how open would you be to dispensing advice to a freshly minted wannabe Craigslist Crusher. Our strategy is to build a website (targeting an untapped vertical) that attracts >100K buyers/sellers (independent of craigslist), before we even launch a marketplace. Your input would be greatly appreciated.

  • ariellephan

     You probably should change it in the post permalink as well

  • Latimerscope

    You are absolutely right starting this kind of startups is notoriously hard and fancy UIs don't cut it. I am still struggling with a ghost town and hardly anyone posts anything. It takes a tremendous effort to kickoff something like this. I think it requires a large momentum of users which is hard to get.But hope reigns supreme 

  • Victor

    There might not be a direct competitor to CL, but there are a few indirect as you mentioned. I intern at Zealous Good. A service that makes donations/giving of items easier than CL. Zealousgood.com

  • Josh Strike

     Behind every great fortune is a crime (and your title is apt) — craigslist became Craigslist because of free personals and for-pay hookers. Other than that, they had no apparent business model before 2006 or so. By the time they got slapped on the wrist, they already had enough traction to basically kick up their heels and coast for the rest of time. Likewise, Paypal became the nightmare it is today because, a long time ago, they were the easiest way to deposit and withdraw to online casinos. Microsoft became the dominant OS by years of illegally strong-arming PC manufacturers. Apple's phone empire couldn't have been built if they hadn't prevented people from changing carriers, which certainly crossed into anti-competitive collusion with AT&T before they backed off of it.

    You're damn right that better software solutions aren't going to break the entrenched behemoths that got their start by bending the law. Better and cheaper services can chip away at a few corners and acquire some niche markets and die-hard fanclubs, but frankly, without an insane amount of capital and some kind of vendetta where you can take a loss for ten years, no one's going to crack more than an ice cube off these glaciers unless they're willing to go where Craig, Peter Thiel, Gates and Zuckerberg went – over to the dark side, making a risky play in a legal gray area, and taking what you're offered before shit contacts fan.

    Most good developers have too much to look forward to and too much sense to take that kind of risk. Open up free personals where hookers pay for ads in every city, right now, add a few extra sections for cars and apartments, and you can probably kill craigslist in a year. If you're not in jail by then.

  • http://hegranes.com/ jonathan hegranes

    Sure thing. Would be happy to help. Whether on this thread or email (jb at hegranes dot com), ping me any time.

  • GlennLEU

    Competing with craigslist is hard, but these companies nibbling away at their heels like AirBNB are going to eventually take them down a notch in certain categories. The recent incident with Padmapper soured me over craigslist, but the reality is that many people still like them and they'll be a force for a long, long time. I think it's a mistake to think that you can't compete with anybody, and this shouldn't ever hold you back from pursuing your dreams. The big advantage that some large sites like craigslist have is that they do have the ability to get media attention without much effort. The proverbial guy in the coffee shop doesn't have that ability – but luckily the rise of social media has made it feasible to reach out directly to your target customers. Between Twitter ads, all kinds of Facebook ad units, the dozens and dozens of companies listed at http://www.buyfacebookfansrevi... for instance, and many other strategies, there's many types of ways to approach getting your message out through social media. The only problem is that you cannot count on getting media attention. Silicon Valley isn't a meritocracy – it's a who do you know type of society. So plan accordingly if you're launching a new product and don't have any media connections. Padmapper will hopefully pull through this better off.

  • http://abdallahalhakim.tumblr.com/ Abdallah Al-Hakim

    I don't want to advocate for copycats but the Craiglist model is one of those that can be copied successful in different markets (i.e. outside of the US). For instance, in the Arab world a startup, Dubizzle (http://www.dubizzle.com/), has created a similar craiglist model and is become very successful. It will be difficult for Craiglist to compete with them in that market because of the inherent local nature of these type of companies.

  • http://www.thisisgoingtobebig.com ceonyc

    Ask Reddit.  :)

  • http://hluska.ca/journal Greg Hluska

    Online classifieds is the ultimate chicken or the egg problem. Nobody will list good quality items if there are not qualified people viewing the ads, and nobody will view ads unless people are listing good quality items. Honestly, I'm not sure what the solution is…(if I figure it out, I'll launch another startup)

  • lexein

    Found a 2010 mention by Eric Friedman and the original post by Andrew Parker with discussion. Now to open this as a drawing on google docs, for endless expansion. Of course many of the startups worked, (jdate, etc), and many are gasping along as marginalized, niche entities, but I must say, my schadenfreude is sated. Teehee!

  • Jake

    Nice article.  In addition to the points you highlighted, Craig's List has been able to beat all new comers because their simple interface is perfect for the “one off” type of transactions most people make there…in other words, you don't need fantastic seller tools if you are not a frequent seller..for that we have Ebay, or Amazon.  Same on the flipside, as a buyer, you just need a quick way to search for that one item or service you are looking for..that used guitar, a room mate, etc…

  • http://twitter.com/medinism Manuel Medina

    Great post Amanda.  I am going to extrapolate what you expose here and assert that the key to all marketplaces is liquidity – defined as the reasonable expectation that at seller will find a buyer and vice versa.  Getting there is a grind and one have to do all sorts schlep, but once you are there then marketplaces are almost hard to kill.  That is there CL fits, they have massive liquidity, hence killing it at this point will require a number of artifacts including forming liquidity in vertical markets (like only appartments or only jobs, etc.), wooing buyers with artificial demand, and whatever else may work.  This is a fascinating subject that a bunch people in the valley are studying and coming up with theories.

  • http://twitter.com/medinism Manuel Medina

    you can also pick a vertical and secure buyers first. then go get sellers for those buyers. after a few transactions close then you need to worry about the demand side of the marketplace.  That will get you real liquidity

  • briandear

    Totally correct.

  • jrochkind

    “kick up their heels and coast for a while” — it may be that ALL craigslist has ever done is kick up their heels and coast. They've got, what, like, 10 staff? Okay, looked it up, they say they've got “thirty some” employees presently. 

    And even Craig himself probably ain't rich off it, but just making a decent comfortable living. 

    Their costs are VERY low. 

    And that really boring simple 1993 interface is part of it. 

    It's not the “venture capital, then IPO or sell to Google” business plan. It's just thirty some employees making a decent living by coasting.  It seems to be working. 

  • MS

    That actually brought up an interesting point how newspaper classified become obsolete with a new medium (internet) rising in popularity.   As much as CL benefited from for-pay prostitution in the early days, it's definitely ridden the tide of the internet revolution.  Extending this hypothesis, the CL-crusher should be a player that starts with mobile and utilize location to facilitate transaction.  Zaarly would be an interesting play. 

  • http://robmillis.com/ Rob Millis

    The only catch is that I see two big advantages both classifieds and Craigslist have over systems like Zaarly: 1) There are a million companies entering the market and none of them can be dominant enough to define the market like Craigslist, and 2) CL and classifieds are bare bones exchanges of information, and sometimes we all just need a purpose-driven system that isn't cute and doesn't have more than one key feature. The only comparable system I can think of is Twitter 1.0.

  • ADRjeffries

    I don't really get why people complain about Craigslist. Not enough rounded corners? It's a lowest common denominator and it's amazing. I think it will always be a piece of the market and agree with Amanda's assessment that a better UI or fancier listing process are “knee jerk problems” a.k.a. not really problems. 

  • http://jasoncrawford.org/ Jason Crawford

    This is spot on. Sellers go where the buyers are.

    I'm amused by your statement that “everyone has their own theory on 2-sided marketplaces” because I wrote about mine a couple of years ago (and it's totally consistent with what you're saying here): http://jasoncrawford.org/2009/...

  • http://www.junointeriors.co.uk/furniture Larry Williams

    Craigslist is really important. It helps me a lot in searching any
    classified ads website. Btw, there's no problem with your blog title. 

  • Chester

    Interesting that there's even more new players in this space… Still tough to compete against Craigslist's liquidity, but their days are numbered.

  • http://lianza.org/ Tom Lianza

    As a buyer, it's fine.  As a seller, the posting process is quite tedious.  

  • http://lianza.org/ Tom Lianza

    As a buyer, it's okay (though, as is obvious from the fact that PadMapper ever existed, browsing listings on a map is a feature many people want and aren't getting).  

    As a seller, the posting process is quite tedious. Nothing to do with rounded corners, but the fact that in 2012 you can't create a post with a picture via your phone… it's at least frustrating.