In a case that may define how the online classified advertising industry evolves for years to come, eBay and Craigslist will square off in Delaware Chancery Court, starting on Dec. 7. The companies are at odds over what eBay calls unlawful efforts by Craigslist to diminish its minority ownership in Craigslist.
Victory by eBay may help the e-commerce company boost its stake in the world’s largest online classified site and pave the way for eBay to exert greater influence over the no-fee strategy that gives Craigslist a big leg up on the competition. A defeat for eBay would let Craigslist keep setting the direction of the online classified business in key markets. The site’s insistence on not charging for most ads makes it hard for rivals, including eBay, to charge for listings in places where Craigslist is entrenched.
Founded by Craig Newmark in 1995, Craigslist is run more as a community service than as a business focused on profits. It lets most users post ads for everything from autos to apartments at no charge, although it generates revenue from listings for jobs, real estate, and adult services in certain markets. The company is expected to have about $100 million in sales this year, from $81 million in 2008, according to consultant AIM Group. Craigslist gets more than 90 percent of the traffic to U.S. online classifieds sites, according to researcher Hitwise.
Analysts speculate that eBay, which is fighting in court partly for the right to elect a member to Craigslist’s board, would use its influence to push Craigslist to charge for other listings. “At the core of this dispute, there seems to be some disagreement over maintaining Craigslist as a community resource,” says Olufunmilayo Arewa, an associate professor of law at Northwestern University.
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