Craig Newmark Founded Craigslist To Give Back, Now He's A Billionaire (2024)

On March 1, 1995, Craig Newmark fired off an email to his friends. Having been laid off from his job at Charles Schwab, where he had explored the early promise of the internet as a computer engineer, he decided he had reached a time in his life to “give back.”

Using his severance package and newfound time off, Newmark launched a mailing list of San Francisco art and technology events that would eventually morph into a website known as Craigslist.org. It was five months before online browser company Netscape went public, an internet coming-of-age moment, which was followed a few weeks later by Microsoft CEO Steve Ballmer fist pumping on stage like an intoxicated toddlerat the launch of the Windows 95 operating system. That December, a consortium of technology companies announced standard specifications for the DVD, a new medium to deliver videos.

While Netscape, Ballmer and DVDs have largely been replaced over the past 22 years, Craigslist.org has persisted as one of the last true dot-com era holdovers to still dominate the web. The online classifieds service was the 46th-most-visited website in the U.S. in March, according to comScore, attracting some 59 million unique visitors—more than Expedia.com and the website for the Wall Street Journal.It's also an incredibly successful business,bringing in enough money by Forbesestimates to make Craig Newmark a billionaire.

For a recent magazine story, Forbesexplored whether two well-financed startups, OfferUp and Letgo, have a shot at displacing Craigslist, which is still where most Americans go to buy and sell locally online. With similar commerce experiences developed as mobile phone apps, OfferUp and Letgo combined have raised nearly $600 million and are on track to facilitate the transaction of more than $40 billion in goods this year. Neither, however, will make any significant revenue from those transactions, and both will spend millions on marketing and growth, raising the question: What exactly are they up against?

The answer: A cash cow.Last year, Craigslist took in upwards of $690 million in revenue, most of which is net profit, according to an estimate by the AIM Group, an Altamonte Springs, Florida-based research firm.Based on valuations of comparable publicly traded companies including eBay , Forbes conservativelyestimates that Craigslist is worth at least $3 billion. That makes Newmark, 64, who owns at least 42% of the company, worth at least $1.3 billion.

Read more about the startups trying to challenge Craigslist here.

Newmark declined to comment for this article. Craigslist CEO Jim Buckmaster, the company's only other significant shareholder, did not respond to emailed requests for comment. Susan MacTavish Best, a Craigslist spokesperson, told Forbes that "we don't comment on numbers that are bandied around by media, analysts or others, and never have."

In an age of pre-revenue unicorns and overvalued tech companies, San Francisco-based Craigslist, which has never raised a single dollar in outside investment, is an anomaly. Having built a widely used network, Newmark and Buckmaster have sat back and watched the dollars roll in through the small subset of categories where Craigslist charges for posting. While both have spoken in past interviews about never intending to maximize revenue, Craigslist, which is commonly mistaken as a not-for-profit,makes more money than most people think.

"Not A Typical Business"

"They are not a typical business in any capitalist sense of the word," said the AIM Group's Peter Zollman. "They could increase revenue to $6 billion or $7 billion a year tomorrow and there wouldn't be much complaining."

Though the vast majority of classifieds are free, the company monetizes a small subset of categories, a practice that began in 1998 when it charged $25 for job postings in San Francisco to cover website costs. Today, the companyhas instituted fees for job postings across the U.S., It also charges fees to list postings incategories including New York City apartments, ticket sales by brokers, automobiles offered by dealers and "therapeutics," a section with offers for massages and other services that law enforcement officials have said are a magnet for illegal prostitution. AIM's Zollman, who called his company's Craigslist revenue estimate "conservative," said the AIM Group counts up listings for each category in various markets and then multiplies that by the known fee associated with that listing. (Fees can range from $7 to $75per posting, depending on location.)

One former Craigslist employee, who spoke toForbeson condition of anonymity, said that fees were initially introduced to counter spammers in particularly competitive categories, like New York City apartment rentals. "Eventually we realized we were making a lot of money and it was more than we needed to just cover costs," the employee said, noting at one point in the early 2000s Craigslist was making $40,000 a day on Bay Area jobs ads alone. "Wecould all do the math, andwe'd wonder where all the money would go."

That money has increased dramatically over the years. In 2015, the AIM Group, which has calculatedCraigslist revenue since 2007, estimated that the company pulled in sales of about $396 million. Its 2016 estimate of $694 million—an increase of 75% over the prior year—came down to the fact thatCraigslist bumped job posting fees in certain cities and instituted them for the first time in others. (In 62 major markets, job postings accounted for $305 million in revenue according to the AIM Group.)

And those numbers may be even higher. San Francisco entrepreneur and investor Greg Kidd believes the company's revenue is well over the nine-figure mark. As the founder of 3Taps, Kidd built an interface for programmers that pulled classifieds data from Craigslist and was able get an accurate picture of the total number of listings on the site. He published a 2011 white paper that pegged Craigslist's annual revenue at $300 million, a number he said has certainly risen as Craigslist has increased or rolled out more fees. Kidd is no longer allowed to access Craigslist's data after settling a lawsuit with the company for $1 million in 2015.

"There are two reasons why people don't understand that Craigslist makes money," Kidd said. "First, the '.org' domain primarily signifies a not-for-profit. ... Also many charges are only incurred by professional organizations like car dealers, real estate dealers, or people in the professional sex industry. Most people never see any fees."

Craigslist's Cash Cow

The revenue is nothing to blink at, but it's the company's profit that is most impressive, said Bessemer Venture Partners' Jeremy Levine. Levine, who has studied the company for years, noted that there are few operating costs—the company has only 50 employees, server costs and legal bills—and estimated that it could be worth anywhere from $5 billion to $10 billion. In 2013, the AIM Group estimated that Craigslist's profit margins were between 79% and 84%, translating to net profits of more than $500 million on 2016's revenues.

"One could argue that Craig Newmark, with his simple-minded stubbornness and refusal to innovate, made himself billions," Levine said. "The guy has to be banking $400 million a year."

It's unclear where Craigslist's profits go.Former employees say there are no lavish expenses at the company and that there are no major projects that the company reinvests in.Forbesexamined the latest financial filings for the Craigslist Charitable Fund, the company's giving arm, and found total disbursem*nts of $20 million from 2012 to 2014.

The company could simply be banking those profits, or they could be flowing into the pockets of Newmark and Buckmaster, whose shareholdings were made public during a prolonged battle in the courts with eBay. In 2004, eBay bought a 28.4% stake in Craigslist and spent years trying to clone it, leading to a seven-year fight thatsettled when eBay sold its shares back to Craigslist for an undisclosed amount in 2015. Prior to Craigslist repurchasing its shares from eBay, Newmark held a 42.6% stake, while Buckmaster owned 29%. Both stakes are presumably higher now following the eBay sale.

Forbesdid not include any dividends that could have accrued over the years from Craigslist's profitable operations in Newmark's net worth calculation. His net worth, which could indeed be much higher, only takes into account the value of his stake in Craigslist based on a conservative estimate of the business' valuation and his percent ownership.

Newmark's Quiet Life

While Newmark is a billionaire, and likely has been for quite some time, he has lived a relatively modest life. Joshua Thayer, who worked at Craigslist for 11 years and left in 2012, called it "ironic" that the company and Newmark ended up making money, because they were just trying to act in good faith as "good internet citizens."

"Itwas pretty clear that Jim or Craig weren't turning around to support Republican causes with all the extra money," he said. "They were doing some amount of good, and they weren't taking fabulous vacations all the time, like jetting off to Aspen. There was nothing of the sort... and not a lot of bullsh*t."

At 64, Newmark has long said that he is not involved in management decisions at Craigslist, though he still continues to do customer service. He launched a new company, Craigconnects.org, in 2011 to develop online networks around his interests, including assisting veterans and protecting the free press. Last year, hecreated the Craig Newmark Foundation and committed to giving $6 million to journalism-related causes like the Poynter Institute and Wikipedia.

"By monetizing Craigslist the way I did in 1999, I probably gave away already 90% or more of my potential net worth," Newmark said in a recent interview with theNieman Journalism Lab. "The rationale is that if you’re a small businessman trying to put food on the table, I’d like you to keep the 100 bucks or whatever for a classified rather than me taking it and maybe giving back someday a buck."

Newmark also disputed any estimations of his net worth and Craigslist's business in thatinterview. "Instead of having billions of dollars, I have a figure much smaller than $400 [million]," he said. "Tangentially—and indulge me—anything which estimates my net worth or revenue for anything I’m attached to, anyone estimating that is almost certainly just plain lying. I have in mind a fake market intelligence group who I won’t name."

Through a spokesperson, Newmark declined to discuss his net worth or Craigslist's financials withForbes.

One former employee who spoke withForbes said that while employees at the company have received equity, most have accepted that the company will never sell or go public and that they will never realize any significant gains. There is no secondary market for Craigslist shares, that person said, who noted that in most cases when an employee with equity leaves, the company simply buys it back for a set price.

Over the years, Newmark has dismissed the idea that he would ever sell his stake in the company, bringing up questions of the company's long-term succession plan once he and Buckmaster are no longer fitto oversee the company. At a 2007 event in New York, he said it wouldn't "feel right" to sell out.

"I am committed to customer service for the rest of my life," he said. "Death is my exit strategy."