News.com just published a story about how the free Craigslist community web site has cost Bay Area newspapers $65 million in lost employment advertising revenue and damaged the local classified advertising business to the tune of millions. Well, that's how the Classified Intelligence report they cited spans it, but they would, wouldn't they?

From my perspective CraigsList has done nothing but good and anything that takes revenue away from the advertising business is inherently good. That could be because I don't work for an advertising company, or a company that derives most if not all of its revenue from advertising. But from that vantage point I'd say the CraigsList experience shows that people all over the world have discovered that doing business person to person works, just ask those who buy and sell daily on eBay.

Sure its a different way to do business, one of the most important differences is that buyers and sellers have to trust each other. For many its a huge leap of faith to complete their first such transaction on a person to person basis. Sure it is open to abuse, but the reality is that the huge majority of all such trades go well and the benefit of eliminating middle men, of creating a vast low overhead global market for obscure used (and even new) items, and a focused local market with no need for shipping, far outweigh the risk.

Besides, did you ever get ripped off in some way by a regular business, even by a huge supposedly trustworthy "efficient" corporation? Did you ever get such shoddy service you swore you'd never shop somewhere again, and did you ever by something that turned out to be a piece of crap and find you were unable to get satisfaction without resorting to legal action? Sure you have, and even if you think you haven't realise that consumers are exploited daily in a far more sinister way. Its a steady drip, drip, drip of price fixing, the consequences of efforts to stamp out competition in a market, or companies willfuly hiding information about harmful or faulty goods (think drugs, tires, and cigarettes) while continuing to sell them because the profit exceeds the eventual cost of compensation. It's no wonder we see giant class action suits, and no wonder corporations would rather support someone who would like to see such suits outlawed.

The benefit of doing business person to person is that by eliminating extraneous middle men the price can be lower and because buyers meet sellers more directly. Also CraigsList and eBay have managed to create huge markets for buying and selling used goods that might otherwise have just remained in closets, or been thrown out with the garbage. Again their ability to bring more buyers and sellers together creates a more efficient market, and by recycling items that are still worth more than their component materials they eliminate wastage in the economy. This allows resources that would otherwise have been utilized to recreate them, to be used in the production of something else - or to just stay unused for future use. Local markets all save on all those transportation costs - if you can buy someone elses used Ikea couch from around the corner then Ikea wont have to ship one all the way from Ikealand (Sweden) or more likely somewhere in Asia.

I should also point out that the inference that CraigsList is doing harm by "taking away" $65m in employment advertising revenue from other advertisers by some kind of magical and unfair means is pretty vaccuous. If you remember CraigsList employment ads are actually the one service it actually charges for. So it managed to compete in the employment advertising market by entirely fair means - and is doing very well at it. If anything CraigsList is at a disadvantage because it has to use all the profits from employment advertising to subsidize all its other services making them entirely free. That's opposed to the usual way of doing business which requires a significant amount of the profits being spent on staff to sell the advertising in the first place. The lesson to be learned is that the best places for advertising are the ones that don't ever ask for advertising.

When you think about it, the millions of revenue "lost" to sites like CraigsList or perhaps billions lost to eBay are not lost at all, it is just spent elsewhere. Money is only ever lost when its spent on something that is overpriced or that will never be utilized to its full potential. If I buy a car, keep it in the garage for ten years and then send it to the crusher well sure that provides jobs for the people who built the car and all the middlemen who got it to the showroom and the sales guy who sold it to me and the finance people who loaned me the money to buy it and the insurance agent who insured it etc. etc. But what a waste of resources if its value is never realized, the steel could have made surgical instruments or farm equiment or any number of other things and the people invovled in its lifecycle could have been spending their time doing something far more productive. If I can sell it for even a fraction of the original price then that's much better. Sure most people do sell their cars before they are worthless, but what about all that junk? How many have watch perfectly good junk get tossed away and carted off to the dump before even the local homeless population can salvage it?

Finally, realize that the advertising buisness is one that is like the media business with just a few very large companies doing the lions share of all advertising. Even in the classified world that is true. Does it really take a giant national classified adverts company to help people sell to each other? Far from being the most efficient way to do things, I believe its often the least efficient - there's no advertising executives, skyscrappers stuffed full of extraneous staff or three martini lunches involved when A places and ad on CraigsList and B responds to it and buys the item.

I think that people have simply forgotten how to do business with their neighbours and the hidden cost of this is that people have lost their essential feeling of existing in a community that is trustworthy and cares about them. If you can't even get enough trust in your community members to trade a used couch for a few bucks then how can you even think about the more important things in live that require trust? That cost is one that's hard to quantify, but we all, deep down, feel it. The inability to trust our neighbours, to leave cars on the street, our kids with a baby sitter, the feeling of insecurity even at home behind locked doors, the inevitability of graffiti on buildings, disrespect of personal property, and that inevitable tendency to label everyone untrustworthy until they have earned it.

I look forward to a day when community driven services like CraigsList are the norm and when regular businesses will eschew the steady slide to mediocrity because they are tempted by the lure of advertising dollars. For me I'll happily pay for my daily news if its good and free of advertising. I'll happily pay to watch TV shows I like on a per show basis if they are free of adverts and commercial influence, and I'd even happily pay to use Craigslist if he ever feels the need to charge for it.

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