eBay vs Craigslist – Who is the Biggest Loser?

eBay vs Craigslist - Who is the Biggest Loser?

Recently numerous media outlets and blogs have detailed the legal developments between these two very popular and highly ranked marketplaces. 

While each marketplace has its loyal followers and vehement detractors, neither one will ultimately be monetarily damaged by the law suit recently sensationalized in the press.  

Damages to reputation are another matter altogether...

First, let me say that I personally use both of these websites, eBay and Craigslist. I use them each for different purposes as both a buyer and a seller online. I am not an investor in either but I have spent both time and money on both which in my mind allows me to speculate and pontificate on this feud.

As a user of each website I have my own opinions of both. Each has good points and both have had well documented problems.

  • eBay's difficulties and odd occurrences seem to get reported more readily, but in my mind, Craigslist can be a much more dangerous place to shop and sell.
  • Craigslist has the very unique position of being a mostly free service for its users and this unique proposition brings out the very worst types of sellers. The prevalence of porn and other adult activity on Craigslist is a real turn off for the average user. While others flock to the site for just this reason.
  • eBay is a more complicated and much more expensive service to use, which in the end simply provides opportunity for more sophisticated fraudsters.
  • eBay has and is trying very hard to change this impression and to remove the unscrupulous sellers from the site.
  • I have seen no effort on Craigslist to do the same.
  • Both sites are the home base of millions of honest hard working sellers. eBay has nurtured the development of its users in a more organized fashion but Craigslist sellers are just as passionate.

(Warning - Speculative Content)

In the most recent fiasco, which started when a Craigslist investor sold his stake in the company to eBay for a reported $250 Million... Neither side has come out ahead. It seems obvious, from eBay's not so wise leaking of the recent lawsuit, that eBay bought a piece of Craigslist with the full intention of building a more stylish replacement "free" service (KijiJi) with intelligence learned at the boardroom table of Craigslist.

eBay's Master Plan

My supposition (and this is taken from news reports, press releases, and my study of the actual lawsuit) is...

eBay planned on slowly making changes to Craigslist (from within its own boardroom) and to learn how Craigslist works. Then slowly remove what works from Craigslist to make the Kijiji offering more attractive to the public in the process. 

Once Kijiji had taken hold, and with the changes put in motion by the Craigslist board, (prompted by eBay's planted member at Craigslist) had reduced the overall value of Craigslist... eBay would then offer to buy out the remaining shareholders of Craigslist.

When this small step in the overall master plan had succeeded (it never did) and Craigslist was then owned completely by eBay...(see Meg Whitman's attempted offer to buy the entire company... via email), eBay would then either merge Craigslist into Kijiji or simply shut it down.

Furthermore, I speculate that soon after this had been accomplished, eBay would then let Kijiji slowly die off with little or no support. Ultimately removing free nationwide Internet classifieds from the competitive landscape. - Big Win in ebay's plan for World Domination

(Its OK we all have moments of magnanimous self indulgence, eBay just lets these moments go too far sometimes).

Craigslist - Too Smart

Mr. Newmark and Mr. Buckmaster at Craigslist saw all of this coming, maybe not from the very first day (see Wall Street Journal article below) but very soon after eBay sent their representative down to the Craigslist boardroom. You can bet Meg Whitman never stepped foot in the Craigslist offices...

In any case, these two executives (One the founder of Craigslist) took steps to protect themselves and the company from what was sure to be a rocky road ahead. From the information I have read in the publicly released law suit, it was almost as if Buckmaster had a crystal ball at his disposal.

Craigslist never actually courted eBay as an investor. The shares eBay purchased were at the time over valued and I personally do not think anyone else but eBay would have purchased them at that price - Including Newmark and Buckmaster.  When eBay bought the shares from a third party, it seems Newmark and Buckmaster evaluated the true intentions of eBay quite accurately.

When Meg Whitman later sent the now infamous email, ( "We would welcome the opportunity to acquire the remainder of [Craigslist] we do not already own, whenever you [and Newmark] feel it would be appropriate," ) offering to buy out the rest of the stockholders, the true intent had long been revealed within the Boardroom of Craigslist.

eBay Outwitted

  • eBay essentially spent $250 Million for a stake in a company they ultimately will not control.
  • eBay spent untold amounts of money developing a competitor (Kijiji) to Craigslist, the company they had invested in.
  • eBay used intelligence gained from their investment in Craigslist to develop Kijiji and yet Kijiji has a minuscule user base with very few listings on the site.
  • My supposition - eBay never really expected or wanted Kijiji to succeed, they only proposed to the Craigslist board that Kijiji would succeed.

Craigslist boardmembers and the public seem to have been too smart - neither bought into Kijiji as anything but what it was. eBay seems to have all but given up on Kijiji now that prospects of controlling Craigslist have dwindled.

From TechCrunch

Kijiji’s visitor stats are still less than 10 percent of the 26.7 million people in the U.S. who went to Craigslist in January, but comScore puts Kijiji as the sixth most visited classifieds site in the U.S. (after Craigslist, sites owned by Dominion Enterprises like Homes.com, AutoTrader, Cars.com, and Apartments.com). Kijiji is ahead of classifieds sites like Oodle (No. 9, with 1.3 million U.S. visitors in January) and Vast (No. 20, with 444,000).

What Now?

eBay is not happy that the master plan failed. 

Therefore - Not only do they file suit against the company they ultimately wanted to squeeze into oblivion (because they wouldn't roll over and play dead in the process), but they then decide to make this law suit public.

It is confusing to think someone at eBay or from outside, advised eBay that it would be a good idea to air this entire fiasco to the public. What purpose do they have to release this information?

Does eBay really want to look this bad in the eyes of investors and users alike? Or, does John Donahoe want Meg Whitman to look this bad?

I see no real reason for eBay to do this, other than the supposition above or simply in spite for Craig Newmark and Jim Buckmaster. The suit will continue, and one can never tell how these things will play out... But if I were the CEO of eBay, I think I would have written off that $250 Million as a bad investment by his predecessor, sell the stake to Yahoo and move on.

There is nothing to be gained here, Craigslist is stronger than the day eBay bought in with the intent of shutting it down or limiting its growth. Now eBay has been legally and artfully placed in a corner which will not allow them to change these circumstances. (results of the suit not yet in... but does anyone expect eBay will win?)

Henry Blodget on the Silicon Alley Insider website last month estimated that Craigslist has $80 million in annual revenue and $25 million in operating profit. But Craigslist is run like a nonprofit, he notes.

To get a look at Craigslist's true value, one would have to make certain assumptions about its earnings power, which leads Blodget to conclude that it is a business with the potential to $750 million in revenue and $500 million of operating profit, giving it a valuation of $5 billion

eBay can not win every battle, and this one is not worth making public - too late for that - but why keep the pot bubbling? What else will come out in the trial to make eBay wish they had never heard of Craigslist?

What other gems did Meg Whitman send out in email?

References: The unique and sorrid details of this fiasco have been made public in many other publications...

The Start of the Craigslist/eBay not so symbiotic relationship is available here:

Wall Street Journal - eBay Buys Stake in Craigslist

And now it has boiled down to this...

Craigslist CEO: eBay lawsuit reeks of hypocrisy

By Jacqui Cheng | Published: May 05, 2008 - 09:29PM CT

UPDATE: 05/14/2008

Craigslist Counter Suit Filed:

http://www.ecommercetimes.com/rsstory/63003.html?welcome=1210821791

 

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0 Responses to eBay vs Craigslist – Who is the Biggest Loser?

  1. rainydayinterns May 17, 2008 at 3:31 pm #

    We had made the following observations after an odd little encounter this past week on Craigslist 🙂

    http://www.rainydaymagazine.com/RDM2008/Home/May/RDMHomeMay08W3.htm#EBayVsCraigslist

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