I'm not sure why this hasn't gotten more industry media attention (or maybe I've been so busy I've missed it), but the eBay-craigslist relationship has finally hit a bad patch.
This fracas has been fairly predictable since eBay purchased 28.4 percent of craigslist in 2004, reportedly from a former employee (though eBay now hints that it bought the shares directly from the company). Everybody involved talked about how amicable and friendly it all was, but you had to wonder how long it would take before tensions bubbled up between the auction giant and the classifieds behemoth.
Craigslist is run essentially as a cooperative, with little focus on profit or stockholder value. At some point, there had to be a flashpoint with a big, publicly owned investor like eBay, which would want to see some return on its investment (the price was never disclosed, but it was said to be a few million dollars; in theory, it's now worth hundreds of millions, at least). Capitalism vs. communism—it never ends happily.
There were a couple of signs of problems in the relationship over the years, most notably eBay's promotion of its own classifieds site (and craigslist competitor), Kijiji. But now, eBay has filed suit (PDF) in Delaware alleging that craigslist has diluted eBay's share in the company by issuing new stock. Craigslist, in turn, allegedly tried to adopt a "poison pill" provision to head off an eBay takeover, and has been trying to buy back eBay's stake.
Game on.
“The recent actions by the craigslist directors have disadvantaged eBay and its investment in craigslist,” eBay General Counsel Michael Jacobson said in a written statement. EBay's Delaware complaint--with some key numbers and details oddly redacted--argues that craigslist's actions "robbed eBay of valuable economic and non-economic rights" and accuses founder/namesake Craig Newmark and CEO Jim Buckmaster of breach of fiduciary duty to shareholders.
Counters craigslist, on its blog: “Sadly, we have an uncomfortably conflicted shareholder in our midst, one that is obsessed with dominating online classifieds for the purpose of maximizing its own profits.”
"Dominating online classifieds?" Hmmm. Who does that sound like? Newspapers, devastated by craigslist, should be watching this legal battle closely. Though it may be too late--this is a case of two big players fighting over a business newspapers wish they still had. The outcome could be a change in ownership structure and control at craigslist. It would be interesting to see how different a company craigslist would be if it had to focus more on the bottom line.
Oh, and memo to newspaper executives: The company's name is craigslist (lowercase), not Craig's List. It's comical how many newspaper company presentations get that wrong. If you don't even know the proper name of one of your biggest competitors...
I was unaware of this.. It's hard to believe how craigslist still has all the traffic when compared to kijiji's look and usability.
Posted by: David C. | June 23, 2008 at 02:28 PM