Now here’s an interesting statistic about Craigslist, the online classified advertising phenomenon and bane of newspaper publishers across the country. Online publishing consulting firm AIM Group is forecasting that Craigslist will generate nearly $125 million in revenues this year.
But here’s the real kicker: Craigslist is on track to earn somewhere between $90 million and $100 million in profits on that revenue. That kind of profit margin is basically unheard of – in any industry. And the fact that it’s happening in the publishing industry is even more amazing.
What’s contributing to these stratospheric results? After all, Craigslist bills itself as a “free classified” site. That may be, but the publisher derives a huge portion of revenue – more than 50% – from paid recruitment advertising, much of it coming straight out of the pockets of the newspaper industry.
And the rest? Chalk up most of that to advertising let’s euphemistically label “adult services.” (AIM Group calls it something else: “Thinly disguised advertising for prostitutes.”)
Of course, these lucrative revenues and profits have come at a price. Craigslist has developed a reputation – not wholly undeserved – of being a virtual clearinghouse for anonymous hook-ups and other forms of vice. Complaints of Craigslist becoming a haven for scam artists, thieves – even the occasional murderer – have become more common as the site has expanded its reach into more cities and regions — now in excess of 500 communities.
And here’s another interesting finding from AIM Group. It reports that Craigslist’s traffic peaked in August of last year (~56 million unique visitors that month), but has fallen since then. In fact, monthly traffic has dropped and now plateaued at ~48 million since February.
Why? AIM speculates it’s the result of an “antiquated” user interface, along with a proliferation of “spam & scam” advertising. You start getting a lot of that … and you’re bound to start driving some people away.
Still, it’s pretty hard to argue with profit margins hovering around 75%.