EBay buys 25% stake in Craigslist / Ex-employee sells equity to online auctioneer, but founder says deal won't change site – SFGATE

Online auctioneer EBay has bought a 25 percent stake in Craigslist, a pioneering Internet forum for finding jobs, housing, dates and goods for sale, the companies said Friday.
The relationship gives EBay “insight into the classified trading model,” said Hani Durzy, spokesman for the San Jose company. “There are a lot of things about Craigslist that intrigue us. They have built a passionate, community-driven business.” The two companies will share knowledge, expertise and resources, he said.
Craig Newmark, Craigslist chairman and founder, said the grassroots site will maintain its mission and philosophy.
“The bottom-line message? We haven’t changed. We’re not gonna,” he said in an interview. Neither Craigslist nor Newmark benefits financially from the deal. EBay and Craigslist both were started in 1995 by pocket-protector-type programmers; each became wildly successful in its own way, attracting fervent communities of people who wanted to make a deal of one sort or another.
EBay became a public company in 1998 and had sales of $2.17 billion, profit of $441.8 million and 5,200 employees in 2003, while Craigslist stayed resolutely noncommercial and low key, run out of a converted Victorian in the Inner Sunset District of San Francisco with 14 employees.
Craigslist’s revenue comes from charging for-profit employers $75 for job postings in the Bay Area and $25 for job postings in New York and Los Angeles. Its other classified ads are free and it does not accept display advertising. The site has been profitable since 1999, according to Chief Executive Officer Jim Buckmaster. Observers have estimated its annual revenue at $7 million. It has expanded into 45 cities and is used by more than 5 million people a month, the company said.
Buckmaster said EBay will help Craigslist expand into overseas markets (it currently has sites in London and three Canadian cities); in developing non-English language versions, starting with Spanish; and in shutting down overseas spammers and scammers who plague its users.
Over the years, Newmark has turned down numerous offers to sell all or part of Craigslist to outside investors. In a posting on his Web log, Newmark said the sale to EBay was conducted by a former employee to whom he had given some equity “with the idea of establishing checks and balances, mostly on myself.”
“Well, the guy later left the company and decided to sell his equity, which I learned he had every legal right to do,” he wrote. “He met with EBay, and EBay in turn approached us to see how we would feel about them getting involved with us.”
Over two months of meetings, EBay assured Newmark and Buckmaster it would not pursue the deal unless they were happy about it, Buckmaster said. Both men said they felt that EBay CEO Meg Whitman and founder Pierre Omidyar “showed that they were interested in us for all the right reasons,” as Newmark put it on his blog.
“Once we knew this equity interest was likely to change hands, we can’t imagine a better outcome than the one we’ve gotten here,” Buckmaster said.
EBay will likely appoint a third member to Craigslist’s board, but it will not invest capital in the company, Buckmaster said. “We’ve never taken outside financing and don’t intend to,” he said.
In response to questions about who sold the stake, Newmark flatly denied two names that were raised. When asked if it was former employee Philip Knowlton, he said: “We’re trying to respect the privacy of everyone involved so I’m not commenting.”
Asked whether he felt hijacked, Newmark said, “That’s water under the bridge.”
The companies declined to disclose terms but sources familiar with online classifieds estimated that EBay paid between $12 million and $15 million.
EBay said it doesn’t expect its investment in Craigslist to affect its results for the third quarter of 2004.
Carolyn Said, an enterprise reporter for The San Francisco Chronicle, covers transformation: how society, business, culture, education and other institutions are changing. Her stories shed light on the human impact of sweeping trends. As a reporter at The Chronicle since 1997, she has also covered the on-demand industry, the foreclosure crisis, the dot-com rise and fall, the California energy crisis and the fallout from economic downturns.


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