Monday, May 14, 2007

A Missing Market Revisited

Not long ago I blogged about a missing market: the market for used goods at small schools, such as the school at which I currently teach. A student of mine had the same idea, and planned to create a Craigslist-like site, which could be adapted to different schools as necessary. He planned to test it at the school here. He was even going to write something about it, and possibly develop it as an entrepreneurial opportunity.

Unfortunately, Facebook had the same idea. Their new Marketplace function allows users to enlist themselves in local "Networks", such as their city or school. They can then view, buy, list, or trade goods and services with other members of their Network. It's all free, too. Someone finally picked up the $20 bill that Craigslist intentionally left lying on the ground.

Craigslist has been praised for refusing to sell out, but think what this really means. Refusing to sell out means that there are many places that want a service that Craigslist is not big enough to provide (You may recall in my previous blog post that a colleague contacted Craigslist, and was told that they only had a few people to manage everything, so they could not spare the resources for college-level sites). Millions of college students and others in similar situations have had to find other ways to get rid of their unwanted stuff. If my school is representative, a lot of stuff apparently just gets thrown away. *

Yet Craigslist's refusal to "sell out" means that someone else will fulfill this need. So what has Craigslist accomplished? They gave up a market and the profits that go with it, keeping themselves smaller, and making themselves just a little bit less relevant as a result. Sometimes, when the market speaks, it's wise to listen. If someone is willing to pay a lot of money to make Craigslist bigger, that might mean that making Craigslist bigger would create benefits that consumers are willing to pay for, making consumers, the old owners of Craigslist, and the new owners of Craigslist all better off than they were before.

*Thanks to Art Carden for these points.