Back in 2016, I put an ad on Craigslist to sell my car.  At that time, I was a bit scared to sell such an important asset on Craigslist (let alone over the internet) as most of my experience with the company was through selling furniture like a cheap couch and a computer chair.

I had no idea what to expect when I hit enter and published the ad, but I figured I’d just test the waters; “What’s the worst that can happen?” is what I told myself.

To my surprise, the day I added my car to Craigslist, I had over ten legitimate interested buyers.

Below is the car I sold (I named her “Nancy Sinatra”, and I was really attached to her).

I ended up selling my Sonata for $2,000 in cash in about 24 hours.

There are a few surprising takeaways from this experience.

• The amount of time it took was incredibly fast.
• I got an offer with a price I was happy with.
• I had legit people interested the day I posted my ad.

Now, these are all pretty shocking outcomes to a process that I had very low expectations of.

But..

You know what the most shocking part about this experience was?

The Most shocking part was that Craigslist made absolutely no money from this transaction.

I uploaded an ad for my car free of charge.  I accepted an appointment to show the car free of charge.  I sold the car for cash…free of charge.

The question you should now  be asking yourself is, “How in the world does Craigslist make money?!”

I setout to find the answer – keep reading to find out.

Where does Craigslist make money?

After doing thorough research into the business model of Craigslist, I am completely surprised by how few sources of revenue they have tapped.

Just like Craiglist made no money through my experience in creating an ad and selling my car, the vast majority of Craigslist ads make absoutely no revenue for the company.

The company generates a MASSIVE amount of website traffic.  In July 2018, Craigslist generated just over half a billion visits (515 million to be more precise).

To put this in perspective, Forbes.com generated 100,000,000 website visits, and MSN.com generated just under 900,000,000, both during the same time period.

Craigslist has created a traffic generating monster that brings an impressive amount of website visits- an amount of traffic any internet entrebreneur would kill for – but they barely monetize that traffic.

Of the roughly half a billion monthly visits to Craigslist, only a miniscule percentage fall into a catetory that is monetized.

Craigslist says the following about fees:

All craigslist postings are free, except for:

•  Job postings in selected areas—$10-75 (fee varies by area)
•  Brokered apartment rentals in NYC area—$10
•  Various by-dealer categories in the US—$3-5
•  Cars/trucks by-dealer in the US, Vancouver BC—$5
•  Furniture by-dealer in the US, Vancouver BC—$3
•  Gigs in US and selected CA areas—$3-10
•  Services in US and CA—$5

Source: Craigslist

To delve deeper, Craigslist generates income from specific regions, and specific postings.

Their job postings do cost a fee, and it seems the larger the market, the larger the fee.

For example, the fee for a job posting in New York City is $45, while a job posting in Buffalo, New York is only $25.

They have apartment rental fees, but only in New York City.

There are dealer fees for items such as cars and furniture – while it was free for me to include a personal ad for my vehicle, it is not free for dealers, and I imagine dealers can benefit from Craigslist, and utilize the platform.

Gigs cost money, and other services cost money as well.

As we can see, while there is a large swath of postings included on Craiglist that bring in no revenue to the company, they do have niche areas of the website that generate income.

Craigslist financial information

Given the limited categories above that Craigslist has monetized, you may be suspecting the company doesn’t make much money….

Think again.

In 2016, Craigslist generated nearly $700 million in revenue.

There are two thoughts that come to mind here.

The first thought is that Craigslist generates an impressive amount of revenue for a site that seems like it doesn’t charge a dime, and that lacks any advertising at all.

The second thought is that while Craigslist generates nearly 6 billion website visits each year, they make less than 12 cents per visitor.

This should tell you that the goal of Craigslist is not to make billions of dollars, but to have a website where normal people can create classified ads for little to no money.

According to AIM Group, “They are not a typical business in any capitalist sense of the word…They could increase revenue to $6 billion or $7 billion a year tomorrow and there wouldn’t be much complaining.”

This insight is compeletely correct – Craigslist could nearly flip a switch and generate ten times the revenue; the company just isn’t interested.

Craigslist competition

Craigslist has never raised a single dollar in funding…

Think about that.

Given the modern-day Silicon Valley venture-backed business model, Craigslist is the true unicorn.  It’s not a unicorn in the silicon valley capitalist sense that it has raised no capital and is worth billions.  It’s a unicorn because it’s an animal that’s almost nonexistent in today’s tech sector.

While Craigslist has been dominant since the mid-1990’s, there does exist a new swarm of companies attempting to change that.

Both OfferUp and Letgo are Silicon Valley-backed startups that have been adequately funded by venture capital and primed to take on Craigslist.

Ryan Mac of Forbs writes, “With a valuation of $1.2 billion, OfferUp has established itself as one of the strongest and most credible challengers ever to Craigslist.”  OfferUp is like a Craigslist with a “Pinterest-style photo feed”.  Just like Craigslist, you can upload photos and a description of your product or service to sell.

Craigslist isn’t the only competitor giving OfferUp fierce competition; Letgo is another venture capital funded startup set to take on Craigslist and OfferUp in the classifed ad space.

Letgo is no small venture itself, as it has raised about $375 million.

It seems there is a war brewing in the classified ad space, and while Craigslist is dominant, it may not be for long.

Conclusion – How does Craigslist make money?

Thanks to massive traffic and a few niche segments of Craigslist, it has been able to monetize the business to the tune of nearly $700 million in annual revenue.

The company could likely increase their revenue five or ten fold if they wanted to, but the non-traditional Craigslist doesnt seem to be interested.

We will see if new competition from OfferUp and Letgo change that…

For now, Craigslist is popular, profitable, and the goliath in the classified ad space.