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Understanding Consumers is Craigslist Forte

WSJ reports that by almost any measure, Craigslist is a phenomenal success. It is the seventh-most-popular Web site in the world, according to the people who measure these things. The free online-classifieds site has become the nightmare of newspaper executives everywhere it launches a list.

While it does not release financial statements, no one doubts -- and its chief executive does not dispute -- that it is comfortably profitable and has been so since 1999, about the time most other children of the dot-com boom started running out of cash.

All the same, no one really questions that Craigslist could be bigger -- much, much bigger. The company took in $25 million or so in revenue last year, while its peers among the Internet's top 10 raked in billions. Since its founding, Craigslist has been aggressively passive (newspapermen might say passively aggressive) about monetizing its huge audience and user base.

There are no banner ads on Craigslist, just the postings of its users, most of which are put online free of charge. CEO Jim Buckmaster takes some pleasure in calling Craigslist a "trailing edge" technology company. Its Web site is stubbornly minimalist and text-heavy, with row after row of blue underlined hyperlinks and nary another color or graphic in sight.

One industry analyst has estimated that Craigslist could generate 20 times that $25 million just by posting a couple of ads on each of its pages. If the estimate is to be believed, that's half a billion dollars a year being left on the table. IMHO, this myopic assessment of the Craigslist potential is missing the real lesson learned. I believe that they're "leading edge" where it matters most, and that's being focused on what their customers really need and value the most.

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