MarketingData-Driven MarketingCraigslist’s Loss Is Rivals’ Gain

Craigslist's Loss Is Rivals' Gain

Craigslist had been on track to collect an estimated $45 million this year from adult services ads.

craigslistFollowing pressure from 21 attorneys general, Craigslist shuttered the adult services sections of its classified advertisement site over the weekend. It replaced the link to adult services ads with a simple black button featuring the word “Censored.”

Law enforcement officials had escalated their calls for Craigslist to remove the ads, contending the ads help promote prostitution and sex trafficking.

According to classified ad consultancy the AIM Group, the section’s closure will have serious revenue implications for the site, which only charges for ads listed in the adult services category, and those in its jobs and property categories. The group estimates adult services ads alone were on course to generate around $45 million in revenue in 2010, representing around a third of its revenue. Craigslist itself, however, maintains that it is not concerned with maximizing its revenues, despite the fact it is registered as a for-profit company.

Although Peter Zollman, the AIM Group’s founding principal, suggests Craigslist’s decision might appease government officials, he also points out that it will likely do little to eliminate illegal practices, but will simply drive such advertisers to Craigslist’s competitors.

“Other sites such as Backpage.com are likely to benefit substantially from the shut down of adult services on Craigslist. Whether these ads are gone from Craigslist permanently or not, those ads will be around on the Web forever,” he told ClickZ. “Bet on significant growth in [Backpage.com’s adult services ad revenue] — and a new spotlight on Village Voice Media as the leading purveyor of prostitution ads now that Craigslist’s section is gone,” he added. Village Voice Media operates Backpage.com. Zollman also cited MyRedBook.com and LVFever as sites that will probably grow as a result of the Craigslist closure.

Craiglist itself has not replied to requests for comment on its decision to stop adult services ads, but in an Aug. 18 blog post its CEO Jim Buckmaster said it was committed to “being socially responsible,” and “aggressively combating violent crime and human rights violations.” In that post, Buckmaster singled out Backpage.com for its lack of manual ad screening, and suggested that listings on that site increased five to ten-fold following Craigslist’s implementation of such practices in May 2009.

Buckmaster also pointed to adult advertisements on sites such as eBay-owned Loquo.com, which is interesting considering the auction site currently owns a 25 percent stake in Craigslist itself.

According to Zollman, the Craiglist closure will have little or no effect on prostitution or sex trafficking, instead driving the practice underground, and potentially making the situation worse. “Although [the section] provided an open marketplace for prostitution and other illegal activity, it also provided a convenient central location for law enforcement officials to find people who were engaging in those illegal activities,” he suggested, adding that the attorneys general were likely acting primarily for political reasons than legal ones, and arguing that Craigslist can “unequivocally” run adult services ads within legal constraints under the communications decency act.

As Zollman notes, various print publications have been running comparable ads for decades without similar scrutiny.

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