Craigslist: a $10 Billion Company?
(Note: The following is 100% speculation. As well, my original math was wrong as the number of pageviews was under-estimated by 70%)
Craigslist attracts about 2.5 eight billion pageviews a month but only begrudgingly charges people to use the service - although it recently implemented a $25 fee for some classified ads that could adding another $75-million in revenue, according to my friend, Mathew Ingram.
Just for fun, let’s do some math to see what Craigslist could make if it started charging for three ad slots/page.
$1/CPM = $7.5 $24 million/month or $90- $288 million/year
$3/CPM = $22.5 $72-million or $270-$864-million/year
$5/CPM = $37.5 $120-million or $450-million $1.44-billion/year
Of course, Craigslist - and its senior executives, Craig Newmark and Jim Buckmaster - isn’t a “normal” company driven by things such as revenue and profits so while the numbers above are sexy, there’s little chance they will materialize unless the company has a dramatic change of heart. But in the name of speculation, let’s press forward.
Can you imagine what Craigslist could be worth if it changed course and started to aggressively monetize the business? For the sake of argument, let’s assume the company now makes about $150-million a year in revenue. And let’s be “Henry Blodget Outrageous” by being ultra-enthusiastic on potential revenue by using the $450-million $1.44-billion a year scenario spelled out above.
Now, you’ve got a $600-million, $1.5-billion, high-margin business. What’s that worth these days: $6-billion? $10-billion? Why not $15-billion? If Craigslist ever did an IPO, investors would be falling over themselves trying to get a piece of the action, which is why investment firms are salivating at the prospect.
More: Freakonomics published a lengthy Q&A with Newmark yesterday. Meanwhile, Valleywag had a fascinating post focused on the 25% of Craigslist sold by Phillip Knowlton to eBay in 2004. Valleywag contends the deal was structure so that Knowlton received $16-million, while Newmark and Buckmaster were given $10-million and $6-million respectively. For bubble watchers, check out this Wall St. Journal story on some interesting bubble indicators are emerging.
Technorati Tags: Craigslist
October 11th, 2007 at 10:50 am
I know you are playing with numbers to have some fun but this is voodoo valuation stuff…with no semblance to reality…
Assuming 2.5 billion page views a month is accurate what is the number after one starts to charge fees?…basic economics and elasticity of demand for their service is unknown. How many of the techno geeks that live off the service will be turned off by this suddenly profit driven mentality…I would think lots. Fewer page views, less monetization potential and the cycle begins. Investment bankers chasing fees would of course discount this logic as we all know how savvy business operators they are…right.
Fees generated to date by CL are based on their most hotly demanded small set of services…not on the bulk of page views that make up the 2.5 billion number. This kind of fun analysis may actually be believed by some people. Disclaimers aside, a dangerous path to follow…
October 11th, 2007 at 12:37 pm
Just one thing, Mark — according to craigslist, the site gets about eight billion page views a month.