Craigslist boss talks
OUT-LAW Radio, 22/02/2007
Craigslist has taken the US by storm and its pages are read 6
billion times a month. CEO Jim Buckmaster explains why he and
founder Craig Newmark don't want your money.
A text transcription follows.
This transcript is for anyone with a hearing impairment or who
for any other reason cannot listen to the MP3 audio file.
The following is the text spoken by OUT-LAW journalist Matthew
Magee.
Hello and welcome to OUT-LAW Radio, the weekly
broadcast that keeps you up to date on all the twists and turns in
the world of technology law.
Every week we bring you the latest news and
in-depth features that help you to make sense of the ever changing
laws that govern technology today
My name is Matthew Magee and coming up on this
week's show we have a special in depth interview with one of
technology's most intriguing leaders, the Chief Executive of
Craigslist, Jim Buckmaster. Hear how the San Franciscan little
guy outran the might of Silicon Valley and how a disdain for
money helps make Craigslist one of the most profitable internet
companies in history.
But first, the news
- Apple has given permission
to use the name iPhone; and
- Broadcasters turn from
YouTube to Joost
Apple and Cisco will share the name iPhone
after settling what could have become a multi‑million dollar trade
mark dispute. Cisco has allowed Apple to use the name all
over the world for its new mobile telephone in a confidential
deal.
Apple launched the phone earlier this year
even though Cisco already had products on the market under its
iPhone name. Cisco sued but has now withdrawn all suits and
agreed to allow Apple to call its new device the iPhone.
Internet television start-up Joost has signed
a major content licensing deal with US entertainment giant Viacom
giving it access to television from MTV, Comedy Central and film
studio Paramount. The deal comes as a reported agreement
between YouTube and broadcaster CBS has broken down.
Joost is the brainchild of Kazaa and Skype
inventors Janus Friis and Niklas Zennström. It is a free online TV
service that is still in beta and has yet to complete its sign-up
of content providers.
Viacom was previously reported to be talking
to Google-owned YouTube about allowing some of its content to
appear on the site, but earlier this month it demanded that YouTube
take down 100,000 clips of its copyrighted content.
The breakdown of the CBS deal and the
willingness of Viacom to sign with Joost could be a sign that
content owners are deserting the user-generated buzz of the Web 2.0
hero YouTube in favour of the more controlled Joost.
That was this weeks OUT-LAW news.
Jim Buckmaster runs one of the most
successful, most powerful internet companies in the world, one with
an estimated market value of a billion dollars and potential
earnings of 500 million dollars a year yet Buckmaster lives in
a rented house, his boss spends his day answering customer e‑mails
and the company works hard to keep earnings to a minimum.
The company is Craigslist,
the listings and classifieds site that bucks every trend going.
The site could make founder Craig Newmark and
chief executive Buckmaster life-changingly wealthy, if only they
would allow the odd banner ad on the site, but they don't; they are
the last of the San Francisco idealists. We caught up with
Buckmaster at Edinburgh University's Entrepreneurship Club where he
was part of its Silicon Valley Speaker Series. He explained
the Craigslist philosophy:
Jim Buckmaster: "You know the way we run the
business is a little bit opposite than the way most businesses, at
least in the US, are run which is mainly the primary objective is
to maximise revenues and profits and everything else is secondary
to that whereas in our view our goal is to kind of maximise
utilities for users so we concentrate on doing what users ask us to
do and little else. We do run a healthy business and do have a
healthy business because, you know, we don't want to borrow money
and we don’t want to solicit outside capital so we do want to stay
in the black but beyond that maximising profit and revenues has
never been a primary goal. It is unfathomable to the financial
community in the US Wall Street because it is antithetical to their
kind of Holy Grail. It just doesn't make sense in their
worldview, it is sacrilegious if you will."
What began as an e‑mail sent to Newmark's friends
about upcoming events eventually became an internet
behemoth. It operates 205 sites in 36 countries and serves
over 6 billion pages to 10 million users a month. It is in the top
10 English language websites in the world, and where the other top
10 sites employ tens of thousands of people. Craigslist employs
23.
Jim Buckmaster: "In most areas companies as in
most companies generally speaking at least in the US many of the
departments, many of the employees are focused on revenue
maximisation so whether you are talking about a sales department,
marketing, advertising and business development, many many
departments focused on things that we just don't do. The
internet industry has some dynamics that I think are fairly unique
to it in terms of costs keep dropping month over month. We
use all free software which gets better month after month without
intervention by us and you know, beyond that we keep as many
aspects of our company and website and business as simple as we
can. It is a self‑service such that there is nothing
preventing people from posting what they want to post so we have
implemented a flagging system where each ad has a series of links
on it that allow users if they see an inappropriate ad to click on
one of those links if enough users agree that the ad is
inappropriate for whatever reason, that ad is taken down
automatically without any intervention from us and that has proved
to be a very effective system, far more so than certainly our
staff, but I think any centralised staff could achieve given that
we are receiving in a total of say 25 million new postings each
month to the tune of, I think hundreds of Encyclopaedia
Britannicas, in terms of the volume of text submitted each
month. No centralised human staff could really monitor or
screen that in any meaningful way and users in large part don't
want to see spam, they don't want to see scams, they don't want to
see illegal activity and they will flag those ads and they will
come down automatically."
The site itself is an oddity, like a refugee from
1996 - it eschews pictures, design, sophistication and even most
colours. Buckmaster doesn't make changes unless users ask him
to. He says it keeps life simple and keeps the company on
track.
Jim Buckmaster: "One of the virtues of focusing
exclusively on what your users are asking for is that really there
is very little time to worry about what other companies are
doing. We literally don't look at, for instance the feature
sets that other companies are offering because if our users aren't
asking for particular features it doesn't matter what other
companies are offering, it doesn't have any relevance for us."
The company may sound like an upside down paradise
of user-focused virtue, but for newspaper executives it is
extremely dangerous. They say that it eats into the classified
ad revenue on which their business depends. Buckmaster thinks
newspapers only have themselves to blame.
Jim Buckmaster: "I think it is
exaggerated to say that Craigslist has a devastating impact on
classifieds revenue and the newspapers as an industry are still
twice as profitable as the average United States
industry. Journalism as practised at newspapers has been hurt
by an excess of money over the years as you have seen newspapers
bought and sold and consolidated into large chains that are run by
corporate managers to maximise profit and increasingly over decades
have resorted to running wire stories, putting an ever greater
proportion of advertising into their newspapers and shying away
from writing hard hitting stories about corruption in high
places. The financial position of newspapers has not declined,
it is more plateaued."
Craigslist has seen its fair share of controversy:
no strings sex ads caused a furore in London, while the police are
frequent callers in the US when guns, drugs or even plutonium ads
are posted.
But what of the company's liability? It has,
says Buckmaster, the same kind of carrier status as an internet
service provider, which means it is not responsible for content
until it is made aware of it but a recent case threatened that
status.
Jim Buckmaster: "It was a lawsuit brought
by some attorneys in Chicago and they argued that we were
responsible for ads posted that expressed discriminatory
preferences for apartment seekers, the current status of that suit
is that it has been dismissed. The group of lawyers is still
deliberating as to whether they want to appeal that
decision. We have an amicus brief filed by half a dozen of the
most prominent internet companies who certainly vehemently believe
that such a ruling would have quite an adverse effect on the
internet as we know."
Craigslist is secretive about its finances, but it
does earn some money. It charges employment and property agencies
in seven US cities a small fee for placing ads. Industry
estimates say that it makes around $25 million a year and has
running costs of around $5 million. It is then wildly profitable.
What do they do with all that spare money?
Jim Buckmaster: "We try to give at least 1% of
gross revenue to charitable concerns each year. We bank
whatever after tax and after charitable contribution profits we
have as another kind of form of insurance to maximise our chances
of always being able to provide the service in ways that users ask
despite what may happen to the viability of various revenue
models."
Buckmaster and Newmark live in San Francisco,
the hub of the world of tech innovation and the home of its
billionaires. The irony is not lost on them that the
high-rolling dotcom boomers who burned through billions of dollars
of investment went bust before they made a penny profit, while the
low-cost, no frills Craigslist makes a healthy profit every
year.
Jim Buckmaster: "It was actually fairly
ironic, I don't know how many, let's say a thousand dotcom style
internet companies were started in the late 90s and I'll say
that 100% of those were geared toward trying to achieve an IPO and
make a lot of money so 99% or more of those companies went bust
without making so much as a nickel. Craigslist was never about
money and yet we are one of the very few that came through the bust
and have done well year after year. We have had experience of
meeting and talking to a number of the Silicon Valley billionaires
and I don't know that they are happier than the average person but
they do have to worry about whether they are going to be kidnapped,
they do have to travel with bodyguards, they do have to deal with
friends and family looking at them very differently than they would
otherwise and you know what do you do with that kind of
money? The answer is you can't spend it on yourself and those
around you in any human scale or sane way. All you do -
generally speaking I'll look at Warren Buffet, the enormous fortune
that he has amassed over a lifetime, meanwhile he has lived a very
kind of frugal life and now as he is nearing the end of it, he is
giving all that money away. You know we have very healthy
livings, we have a very profitable business, stopping short of
pursuing enormous wealth when you already have a very, very
comfortable lifestyle. I think if a lot of people stopped and
thought about and put themselves in that position, I think it would
resonate and make sense to them."
That is all we have time for this week. Thanks
for listening.
Why not get in touch with OUT-LAW Radio. Do
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OUT-LAW Radio was produced and presented by
Matthew Magee for international law firm, Pinsent
Masons.
