How Does Craigslist Make Money – Craigslist Business Model Explained 2021

Digital advertisements are very popular nowadays than traditional advertisements in magazines or newspapers. It’s easy to access through the internet to buy or sell something. Moreover, putting ads online is cheaper and convenient to reach people than in classified sections of a newspaper.

Therefore, online classified advertising websites like Craigslist are popular to post listings in various categories. Started as a side gig in 1995, it’s now a $3 billion company with 55 million monthly daily visitors.

In fact, the US, Japan, Australia and Canada are among the top 10 Craigslist users by geographic location. With this large no. of subscribers, Craigslist mostly makes money from ad posting fees between $3-$75.

However, according to the AIM group’s report, after making $1 billion in 2018, Craigslist’s revenue radically fell to 760 million in 2019 and $565 million in 2020.

Go through the article to know more details about the business model and how does Craigslist make money.

What Is Craigslist And How Did It Start?

Craigslist is an online classified marketplace where users post or browse listings about different commercials categories. Especially, the website presents region-specific searches that make it easier for people to browse.

Founded in 1995 by Craig Newmark in San Fransisco, Craigslist started as a non-profit organization of email dissemination source. But in 1999, it registered itself as a for-profit company.

Basically, Newmark started an email list to notify everyone about the upcoming events. But this fun project went popular when people began posting different content like selling or buying stuff. So, he made a simple website to streamline the content properly. Soon his email listing became known as Craig’s list and the website went live in 1996.

Currently, Craigslist is available in over 700 cities across 70 countries. Every region’s website is made up of the following categories,

  • Jobs including accounting, science, customer service, medical, sales and many more.
  • Services like beauty, automotive, household, travel etc.
  • Housing like parking, storage, real estate etc.
  • For sale offering furniture to tickets, video gaming to auto parts and so on.
  • Community listing includes different events, groups, classes, lost & found etc.
  • Gigs like domestic, talent and others.

When a user wants a service or product, he directly contacts the person via the contact information given on the website. Not only commercial searching, but users can also get into the live discussions on the site’s forums.

To date, improvements have done and many sections have been added to the platform. But the initial design is still the same since the mid-90s. People can even now access the website through the Android and iOS mobile app too since December 2019.

An Overview On Craiglist Business Model

Before starting how Craigslist makes money online, it’s important to understand its core operations and business structure. Here is an overview.

Peer to Peer Interaction

The business model of Craigslist is simple. It’s mainly a peer-to-peer (P2P) model along with the agency-to-peer (A2P) and agency-to-agency (A2A) model. Anyone can view advertisements on this platform regardless of districts, cities, states or countries.

Moreover, active interaction between customers and the community increases web traffic via references or word of mouth. Consequently, it generates a potential revenue stream for this platform. In fact, the Craigslist database utilizes this opportunity to promote new services.

Such biggest exposure further helps build new signups, account activation conversations, increase website popularity and usage through active account users, channeling communities and also rare users.

Geo-targeting Craigslist Ads

Craigslist has made it possible to access advertisements specific to regions. With just a few clicks, people worldwide can search and access hundreds of ads on this platform.

Moreover, anyone can post on Craigslist free (depending on the ad) with or without an account and target a wide range of people. Though the advantage of having an account is it can be revised, retrieved or deleted anytime. Posting without the account needs links through email to modify the ad.

As these ads are geologically based on close-range proximity, users can deal with offers in close location or distance. The motive of such a system is to protect honest users from fraudulent and false promises and avoid potential threats.

However, users can navigate other regions to find advertisements from other locations and make deals. But it’s not recommended to deal with distant advertisers.

CPlus App For Smart Devices

Posting to sell has now been easier with the CPlus app. To compete with other mobile-based platforms like Letgo and OfferUp, Craigslist introduced this application for both smartphones and tablets. It’s a third-party mobile gateway app to the original website and free to use.

Not to mention, CPlus for Craigslist is incredibly helpful for users to browse, search and post easily and effectively. Besides, it also manages transactions from daily postings and makes money for the company.

Here are the amazing features of the Craigslist app.

  • Geo-location enables users to find nearby cities automatically.
  • Multiple display modes for search result like photo grid view, photo+description view, photo album view, big photo view and map view.
  • Multiple city searches for ads and classifieds.
  • Save postings to the favorite list and add notes to the favorite postings.
  • Save searches to start screen and avoid repetition of same searches.
  • Update search in the result page like category, filter and sorting.
  • Native in-app posting for creating new ads and classifieds to buy, sell or rent services/products.
  • Greate mobile optimization for easy function and readability.
  • Renew, edit or repost your ads and handle multiple accounts from the iPhone.

How Does Craigslist Make Money?

If Craigslist doesn’t take payments for ad posting, then how the company makes money fast? The answer is it charges a listing fee for selected classified sections.

Let’s look at the basic Craigslist fee structure for posting advertisements.

  • $25 is charged for the job listing within the six major US cities.
  • $75 is charged for the job listing within the San Fransisco area.
  • $10 is charged for the flat or apartment rental listing in New York.

The above earnings are only to cover the operational expenses without any major profit. Here are the following classified ad categories where Craigslist charges users for uploading a listing.

  • Job posting in selected areas: $10-$75, fee varies by area.
  • Broker apartment rentals in New York: $10.
  • All by-dealer categories in the US area: $3-$5.
  • Cars and trucks by dealers in the US (Vancouver, BC): $5.
  • Furniture by dealers in the US (Vancouver, BC): $3.
  • Gigs in the US and selected CA areas: $3-$10.
  • Services in the US and CA: $5.

Except for the above categories, all ad placements on Craigslist are free because the owners believe in a quality user experience. In short, the company runs on a freemium model to retain customers.

The Revenue Generation Of Craigslist

The powerhouse of classified advertisement, Craigslist, has always made a profitable revenue. With the huge traffic, it is one of the top-visited websites in the US.

In 2003, the Advanced Interactive Media (AIM) group first estimated Craigslist’s revenue was $7 million only. For many years the company’s annual profit keep increasing and raised the highest amount of $1 billion in 2018.

Meanwhile, the last two years have seen a drastic fall in their revenue. It only generated $760 million in 2019, a 27% fall from 2018 and $565 million in 2020, a 25% fall from 2019.

The COVID-19 pandemic situation had a severe impact on their revenue generation. The company lost profit in almost every category except for  “Gigs”. The biggest hit was on Job ads by 32% down and auto ads by 22% down.

However, with 50 employees and over 55 million monthly users, Craigslist will surely make a turnover and earn more money.

Summing Up

Craigslist has made a revolutionary step for posting advertising which people can access all over the globe. The Newspaper Association of America estimated the newspaper revenue is decline due to such online sites. The expense of posting an ad in newspapers is almost $150, whereas Craigslist offers it for free.

Moreover, online transactions on this platform are safe, which makes it reliable among users. However, other digital marketplaces like Facebook are making it tough for Craigslist to retain customers. But with a simple and convenient website, Craigslist can still make a vital presence in the market.

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