Startups

The Startups Attempting To Dismantle Craigslist

Despite Craiglist’s unappealing design, its team has built a profitable company that has almost displaced traditional classifieds. Craigslist is the default website of choice to find an apartment, purchase used cars, and even find jobs.

But no company is perfect, and Craigslist’s weaknesses come in the form of scams, misuse, privacy, and that lurking feeling of anxiety you always get right before meeting the person behind the anonymous email address.

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Nowadays, startups, backed by deep-pocketed venture capital firms, are looking to take on the stubborn flip phone of the classifieds industry piece by piece.

Carving Out A Well-Funded Niche

Playing off of the idea that rising, mobile-powered millennials and Generation Z consumers are looking for simplicity, security, and smartphone accessibility, various startups have emerged in the classifieds and second-hand goods space with design teams and engineers in tow. But instead of building a new form of Craigslist entirely, many have focused on carving out a piece of Craigslist’s comprehensive marketplace.

Some of those startups include Glassdoor and Monster (acquired by RandStad for $429 million) which are popular apps for job searches; TaskRabbit and Handy for services; and Apartment List, Zillow, and Radpad for the housing industry.

To examine how these companies are approaching the market, we took a look at the strategies of two major players: Poshmark and Letgo.

Poshmark Brings Consignment Fashion To Your Phone

Poshmark is hoping that VC support and social media expertise will bring it success in the online fashion consignment industry. And it’s using an exclusively mobile approach.

Unlike Craigslist’s more detached approach, Poshmark is more hands-on in its P2P transactions. Through its mobile app, sellers take pictures of their clothing, shoes, and accessories and add them to their profile with brand names, size, and original price, allowing buyers to make more refined searches. And instead of posting individual listings repeatedly, sellers can promote their “closet” within their network and through mobile Poshmark events with no expiration on listings.

And where Craigslist leaves the transaction up to individuals through email, making it sometimes difficult to keep track through text and in an inbox, the platform facilitates the bargaining, purchasing, and shipping process between users. Poshmark has also aimed to ensure the quality of luxury items with authentication service. It also allows buyers to return damaged and misrepresented items.

“By focusing on fashion, Poshmark has empowered men and women across the country to become the next generation of retailers, leveraging social selling to build a community centered around style and sharing,” Poshmark spokesperson Sera Michael told Crunchbase News in an email.

Since its founding in 2011, the company has raised more than $150 million from investors including Menlo Ventures, the Mayfield Fund, Temasek, and GGV Capital.

“Poshmark’s community of over four million Seller Stylists not only sell their style, but also curate items for their shoppers, sharing over 14 million items each day and uploading $100 million worth of inventory to the platform every week,” Michael wrote. She also added that the average Poshmark user spends about 25 minutes per day in the app, opening it 7-9 times a day.

And its returns indicate that it is proving investors right. According to TechCrunch, the company, which takes a 20 percent commission on all of its sales (it takes $2.95 for transactions under $15), reported being cash flow positive and on track to reach $100 million in revenue in 2017.

Letgo Brings Design And Automation To Thrifting

Another startup that has remained more niche than Craigslist, but that has broadened its post categories beyond fashion, is Letgo. The company has aimed to become the go-to app for peer-to-peer, second-hand goods.

Founded in 2015, the company has designed a distinctly mobile-first platform to help users upload and post pictures of their unwanted items ranging in category from clothing to electronics to furniture. Through its Amazon and Airbnb-like rating system, the company has also attempted to address one of Craigslist’s pain points through social accountability. The platform relies on artificial intelligence to automate the posting process.

“Letgo [is] the only app with AI that automatically titles and categorizes what you want to sell,” Letgo head of communications Jonathan Lowe told Crunchbase News.

The company has raised a known total of $475 million from big name investors like Accel and New Enterprise Associates, as well as tech companies like South Africa-based Naspers. Most recently, the company scored a $100 million Series D round that reportedly boosted its valuation to north of $1 billion.

The company has managed to grow to over 75 million app downloads primarily in the U.S. with over 200 million listings since it was founded, according to Lowe. This growth was fueled by both its strong capital backing, as well as the fact that its platform is completely free.

Unlike Poshmark, Letgo has focused on pursuing growth rather than profitability, at least in the short term. This growth strategy is not surprising given its competition with OfferUp (a very similar app which is valued at $1 billion and has raised an impressive $221.6 million of its own).

However, Letgo will eventually have to prove its worth to investors. And monetization may prove difficult. Unlike Poshmark, deals through the app are largely carried out through hands-off, in-person transactions. Crunchbase News asked the company how it plans to monetize the app in the future.

“There is enormous opportunity to innovate in this space and the revenue potential is just as big. We’re exploring several monetization strategies—particularly around value-added services for users—but it’s free to download Letgo and list something,” Lowe wrote in response.

It recently introduced a housing category and is testing services, which could potentially be sources of revenue in the future. For now, though, both categories seem to be in their beta phases.

While these startups trudge on in their mission to carve out a spot in classifieds, one slightly bigger player, Facebook, has decided to take Craigslist head-on with its own marketplace.

You Have To Be Big To Go Big

Facebook, the most widely used global social networking platform, officially launched its Craigslist-like platform, Marketplace, on mobile in the U.S., New Zealand, the UK, and Australia in October 2016. The platform, which emerged out of Facebook’s Groups, leveraged Facebook’s social media and networking strength to bring a more user-friendly, familiar, and integrated system to the classifieds and P2P online shopping industry. The platform allows users to search by category for items in their area, and Facebook Messenger allows them to connect and arrange in-person transactions. Integration with Facebook profiles potentially makes the process less risky.

Unlike Letgo, Facebook’s housing and rentals category mirror the efficiency and detail that Craigslist offers. Facebook Marketplace spokesperson Lisa Revelli told Crunchbase News that marketplace has expanded quite a bit since 2016. It is available in 71 countries and has a reported monthly active user base of more than 800 million. But, even with its being a viable competitor to Craigslist, Marketplace hasn’t monetized the service.

“Facebook does not charge our partners […] to list on Marketplace, and FB does not earn any revenue when services are booked through Marketplace,” Revelli explained.

But that doesn’t mean that the social media giant doesn’t benefit monetarily. Marketplace, according to Revelli, falls under the same data policy as the rest of Facebook. As a result, the company may benefit from collecting data about transactions and listed items.

However, even with startups building selling experiences that offer automation and design improvements, Craigslist’s humble beginnings have defined its road to success. If individuals just want an app that gets the job done, Craigslist is alive and well.

Illustration Credit: Li Anne Dias

Editorial Note: A previous version of this article reported that letgo had 75 million app downloads and 200 million listings in the U.S. alone, it has since been updated. It has also been updated to reflect that letgo is testing services for some users, it has not fully launched services.