eBay’s one-time dream of anchoring its large classifieds/marketplace business with Craigslist as now officially ended. Last week, eBay accepted a cash buyout from Craigslist for its 28.4 percent stake, allowing eBay to focus on splitting off its multi-billion dollar PayPal division as a separate company.
eBay isn’t disclosing what it received for its stake, but it is likely to be at least 10x what it sunk to buy into Craigslist, or $320 million. Aim Group analyst Peter Zollman notes that Craigslist has plenty of cash in the bank to pay for those shares, with estimated profits of $304 million in 2015, or nearly 2.5x more than its $130-140 million profit in 2013. The surge in profits occurred as Craigslist started charging auto dealers for used auto ads, in addition to its fees for apartment, recruitment and escort listings in certain markets. Other parts of the site remain free.
eBay had purchased its stake in 2004 for $16 million from one of the Craigslist’s early employees. It initially sought a friendly relationship with the Craigslist leadership, paying founder Craig Newmark and CEO Jim Buckmaster $16 million for goodwill. In exchange, it was awarded a board seat.
In theory, the relationship could have worked. eBay was one of the only dotcoms to successfully build community into its business model . Publicly, it remained a company that was dedicated to “community first.” In reality, however, that may have been an earlier version of eBay. At the time of the deal, eBay had already begun focusing on hyper-efficient services – unlike Craigslist’s avowedly lowtech, small revenue approach. It had also started charging higher fees on most items, and focusing more on profits than on building a viral, Craigslist-like community. It also was focused on a number of big dollar paid classifieds and vertical areas, especially eBay Motors.
By 2008, relations between the two companies dissippated into a number of lawsuits and counter-lawsuits, as eBay set in motion a plan to launch its Kijiiji classifieds as a Craigslist clone – apparently as a hedge in case it wasn’t able to assume control over Craigslist. Later, in court documents, it was revealed that eBay had passed along confidential board information to the Kijiiji team.
Ultimately, Kijiiji – now eBay Classifieds in the U.S. — never broke out as a person to person classifieds success, although it is the leading classifieds site in Canada and has a good presence in many countries. Even if does not serve as an effective P2P anchor for classifieds, eBay has become one of the leading online classifieds sites in the world, with major international properties such as eBay Kleinenzeigen, Marketplaats, Gumtree and LaQUo.
While eBay may ultimately be more focused on its enterprise businesses, former CEO Meg Whitman’s 2006 description of classifieds as eBay’s “lead generation, advertising based model” still holds true. As for the future of Craigslist, we’ve noted press reports in the Wall Street Journal and others suggesting that Craigslist has been made obsolete by the emergence of smart phones and lost its chance to become a major ecommerce player. The latter part may be true – Craigslist is hardly poised to compete in the goods value chain against Amazon, Google, eBay and others. But it remains the global leader in person-to-person online classifieds, and there is no reason to suggest that it won’t remain the leader.