How To Save Craigslist From The Unicorn Rustlers

Anyone reading the popular tech media recently would believe Craigslist is on a long and lonely road to extinction thanks to the launch of Facebook Marketplace. Dubbed a “Craigslist killer”, Facebook has cut right in on Craigslist’s home turf of local commerce, positioning itself as a safer, friendlier way to exchange goods online within local communities.

And with Airbnb’s recent half a billion dollar raise at a speculated $30b valuation, we’re once again reminded of how successful companies have been at chipping verticals out of Craigslist and building empires.

In 2008 Craigslist was valued at $5 billion. In 2015 it was reportedly valued at $3 billion. In seven years its value has fallen by 40%. At the same time, businesses that basically took verticals from Craigslist have exploded to become some of the hottest unicorns in the world. Airbnb masterfully picked off short term accommodation and is now valued at $27b, Zillow grabbed real-estate, it’s now public with a market cap of $6.4b, and local services went to Thumbtack now $1.3b. And right from under its nose, Facebook is now stealing local commerce — perhaps Craigslist’s biggest threat yet.

What’s clear is Craigslist has sat on a goldmine and let the prospectors come in and haul out the bullion, vertical by vertical. Craigslist was a breeding stud for unicorns (arguably the most effective outside of Y Combinator), but they have all run off without so much as a thanks to their breeder. While these companies have grown into major unicorns, Craigslist has somewhat wilted (from a valuation standpoint at least). So how does Craigslist stem the multi billion dollar transfer of value from its own multi hyperlinked pages to these upstarts?

What Airbnb, Thumbtack and now Facebook have done is to create trust within the platform.

Mr Newmark, Craigslist’s eponymous founder, may not care deeply about his own wealth creation but it does seem he cares deeply about providing a valuable service to Craigslist’s millions of users. While these new vertical-centric unicorns may have stolen some of the value, it is actually Craigslist’s breadth that remains its true power. So what prevents it from milking its own golden cow? Yes it could be decluttered slightly, but fundamentally what Airbnb, Thumbtack and now Facebook have done is to create trust within the platform.

For example, you used to be able to find an apartment on Craigslist for a night but there was a “user beware overlay”. No one was quite sure who each other was or whether they could be trusted. While the connection might have been on Craigslist the true value was transacted off platform. Along comes Airbnb and everyone on the platform is verified and rated, all entities are known, no credit card details are ever shared and the net result is a trusted environment.

Much has been written about the evolution of marketplaces, with each iteration eating the next. So what’s incredible is despite being a 1.0 marketplace, Craigslist remains part of the American culture yet retains a fraction of its overall potential value. But it doesn’t need to be that way, with a few amendments:

1. From ‘buyer beware’ to ‘aware’:

Move Craigslist on from ‘buyer beware’ to a place where exchanges are safe and secure. An obvious step to achieve this is adding user ratings and reviews, something Facebook isn’t pursuing and potentially a valuable advantage. It’s also possible to conduct fraud and identity checks automatically, without sharing that information or undermining Craigslist’s ethos of freedom and openness.

2. A trusted user experience:

Craigslist’s ‘do anything from the homepage’ was revolutionary and remains very relevant (and familiar) today. However, it can be limiting when it comes to discoverability. Beyond a design facelift, a further step towards trust would be to prioritize the most trusted listings and those with responsive communication skills (or any other behavior the platform seeks to encourage).

Facebook and every other vertical marketplace has built messaging into its flow, with masked contact details, so users can communicate without sharing private details.

3. Get mobile

Craigslist has resisted adapting to new technologies — perhaps the most obvious is mobile. While it has managed to remain the dominant classifieds player despite this resistance to technological change, competitors that have prioritised a mobile-first experience are closing in. Facebook Marketplace sits at the center of one of the most downloaded mobile apps in the world. Other competing local commerce mobile apps including Close5, 5miles and Letgo as well as every other classifieds site from Ebay to Gumtree is on mobile.

4. Payments

While Craigslist has never been about making money, with more than 50 billion page views per month and 80 million classified listings a month, there’s a lot of commerce going on. Payments currently take place ‘off platform’ with everything from cash and checks to bank transfers (and others). Bringing these payments ‘on platform’ gives Craigslist the ability to truly verify its members and bring genuine trust. Payments could be the key to Craigslist’s competitive advantage over Facebook Marketplace which doesn’t facilitate the transaction or take any responsibility for fraud or user disputes.

Furthermore, payments opens the opportunity to introduce an escrow environment, where funds can be held securely and released upon a successful provision of a good or service, providing absolute protection and empowerment of both buyer and seller.

5. All that data

Craigslist is sitting on the ultimate up-sell / cross-sell opportunity. Bought a baby crib, need a car seat? Got a new job, need a moving service? The true beauty of Craigslist is its breadth and depth. No other platform — with the exception, now, of Facebook — has the ability to know so much about its members, and the ability to cross-pollinate across multiple verticals could be the true underlying value of the business.

Craig Newmark has done something that only very few people have done — Steve Jobs, Elon Musk, Bill Gates — the invention of Craigslist has changed the way Americans live their lives and kickstarted the Sharing Economy. He may be driven by a social agenda more than the quest for billions, but there’s no doubt making these changes would be a huge step forward for both.