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What Does eBay Do with Craigslist Stake?

Update: Silicon Valley Insider estimates Craigslist is worth $5-billion, making eBay’s stake worth $1.25-billion – not too shabby for an investment estimated at about $50-million.

With John Donahue taking over the eBay helm from Meg Whitman next week, I wonder if one of the key strategic issues on his plate is what to do with the 25% stake that eBay owns in Craigslist.

For the lack of a better word, it’s a “different” kind of investment given eBay does not seem to have any role in Craigslist, and there are no signs that founder Craig Newmark plans to sell or do an IPO any time soon. For eBay, the 25% stake, which has been estimated to be worth as much as $600-million, is pretty much dead-in-the-water money.

So, what does eBay do other than hold on for as long as it takes until Newmark feels it’s time to cash in and do something new and different. Perhaps waiting Newmark out is the best strategy given Craigslist’s strong brand, traffic (10 billion page views a month) and potential to generate a lot more revenue that Newmark and CEO Jim Buckmaster have chosen to currently pull in.

Of course, a lot depends on the terms of the agreement that Buckmaster brokered with eBay when it purchased the 25% stake from a Craigslist employee in 2004. This is entirely speculation but maybe eBay has a first right of refusal on the Newmark’s shares.

An intriguing question is whether anyone other than eBay would be interested in buying the stake? At face value, you have to believe there would be no lack of interested suitors looking to buy a stake in the world’s largest online classified player. The downside is they would likely have to deal with the same dead-in-the-water-until-Newmark-makes-a-move issue as eBay.

Another angle to the eBay-Craigslist relationship is how eBay’s own online classified business, Kijiji, comes into play. Despite the goofy name, Kijiji seems to be on a major roll (see the graph below that shows Kijiji and Craigslist had about the same amount of traffic last month), although it still lags far behind Craigslist.

If Kijiji emerges as a strong number two, does eBay really need its Craigslist stake? Or does eBay hold on to its Craigslist shares so it can have control of the two biggest players?

One more thought, if Donahue isn’t thinking about what to do with Craigslist, perhaps he’ll be focused on the future of StumbleUpon (I still don’t get why eBay bought it) and Skype (a great business bought at a rich valuation but not much of a strategic fit for eBay)

For more on Craigslist, check out this recent BBC.com story and video with Buckmaster.

Update: According to The Tech Chronicles, Craigslist is under fire from Connecticut Attorney General Richard Blumenthal for brushing aside requests to stop running advertising for prostitutes. “I’m astonished and appalled by Craigslist’s refusal to recognize the reality of prostitution on it’s Web site – despite advertisements containing graphic photographs and hourly rates, and widespread public reports of prostitutes using the site,” Blumenthal said.

More: Craigslist has just added support for more languages, including Quebecois.

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  • http://indirecthit.com Chris L

    Great article, didn’t know Ebay owned a portion of Craigslist. They must be a little angry at that. ;)

    Just a small correction, if you do an analysis with compete.com on craigslist.org Craiglists has around 30.1 million visitors. Compared to Kijiji.com’s 1.8 million.

  • http://www.markevanstech.com Mark Evans

    Craig:

    Thanks for the traffic catch! I was using Craigslist.com by mistake.

  • http://www.mappingtheweb.com Aidan Henry

    I think it is extremely difficult to put a true value on Craigslist. The beauty of the service lies in its simplicity and lack of ads (and the fact that it’s free for the most part). Should Craigslist change any of these factors in an attempt to generate more revenue, a severe user backlash would occur. This would, in turn, negatively affect the valuation. In addition, it would take away from Craigslist’s pristine, non-profit-like image, which has contributed to the success of the service.

    It’s a true dilemma that has no right answer – unless of course Newmark simply plans to keep the service as a philanthropic endeavour…

    Cheers,
    Aidan
    http://www.MappingTheWeb.com

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