What We Can Learn From Mess

Gary Wolf wrote a Wired cover story about craigslist called "Why Craigslist Is Such A Mess". It's a somewhat strange article because it is highly critical of craigslist's design, management, and lack of innovation. But you cannot read that article and not come away impressed with Craig Newmark, Jim Buckmaster, and the ethos of craigslist.

Here are some stats I pulled from the piece:

this site not only beats its competitors—Monster, CareerBuilder,
Yahoo's HotJobs—but garners more traffic than all of them combined

With more than 47 million unique users every month in the US
alone—nearly a fifth of the nation's adult population—it is the most
important community site going and yet the most underdeveloped

One recent report, from a consulting firm that counted the paid ads,
estimates that revenue could top $100 million in 2009. Should
craigslist ever be sold, the price likely would run into the billions

Craigslist gets more traffic than either eBay or Amazon.com. eBay has
more than 16,000 employees. Amazon has more than 20,000. Craigslist has

Only programmers, customer service reps, and accounting staff work at
craigslist. There is no business development, no human resources, no
sales. As a result, there are no meetings.

Craigslist has done this by doing very little. As Gary points out, the service's interface has not changed in a very long time, if at all. The company has no marketers. To quote Gary again, "By eliminating marketing, sales, and business development, craigslist's
programmers have cut out all the cushioning layers that separate them
from the users they serve."

I do not believe we should criticize a company that operates like this. We should learn from it. Of all the Internet companies out there, the one that serves as the most iconic for our firm is craigslist, not Google. We dream of funding a company that can be worth a billion dollars with only 30 employees. We've never done it and I don't know if we ever will. But we are going to try again and again and again.

My partner Brad wrote a post on the USV blog recently about the freeconomics debate and he ended with this observation.

The much more interesting conversation is about the appropriate
economic model for a social network that depends on the contributions
of its participants and increases in value as more people use it. One
possibility is that the economic models of these networks will look
more like Craigslist than Yahoo. Recent estimates peg Craigslist's
revenue at more than $100,000,000. Not much compared to Yahoo's
billions, but Craigslist still employs only 28 people. Even allowing
for substantial bandwidth, and server costs, it is still hard to
imagine how their costs are more than $5,000,000. Since Craigslist
collapsed a multibillion dollar classified advertising business into a
fabulously profitable $100,000,000 business, perhaps we should be
talking about the potential deflationary impact of more "zero billion
dollar" businesses. As the radical efficiencies of the web seep into
more sectors of the economy, and participants in social networks
exchange attention instead of dollars, will governments at all levels
need to make do with less tax revenue? That's a scary thought in an era
of high deficits unless traditional governments can learn from the
efficent governance systems of social networks and provide more for

And of course, that is exactly Craig's point:

"People are good and trustworthy and generally just concerned with
getting through the day," Newmark says. If most people are good and
their needs are simple, all you have to do to serve them well is build
a minimal infrastructure allowing them to get together and work things
out for themselves. Any additional features are almost certainly
superfluous and could even be damaging.

A system like Craigslist does result in a lot spam, fraud, and abuse. But it is also certainly the most efficient and cost effective way to make a market. We should all be studying this system, understanding why it works so well, and how we can replicate it on our businesses, institutions, and governments. I think we have no other choice.

Reblog this post [with Zemanta]
#VC & Technology