(Sept. 15,  2004) - Recently, Ebay managed to acquire a 25% stake in Craig's List. The announcement prompted a wave of commentary in Craig's blog. It's the kind of stuff you'd expect in a grass roots success.

The stake was sold by an ex-employee. Ebay now sits on the board as a somewhat uninvited guest. None of the funds went to Craig or the company. Although the ex-employee was entitled to sell his asset, the circumstances surrounding the sale were typical of the kinds of things that happen in homegrown idealistic shops.

There was a small wave of tittering in our neck of the world. The 'opportunity' had been shopped through a number of newspapers and an ad agency or two. With years of bad experience in the 'partial stakes' business under their belts,  everyone politely passed. The world of 'exes' is a little one.

Small stakes do not often produce the much ballyhooed 'insight'. A great deal of money disappeared during the bubble as newspapers (in particular) tried to learn adaptiveness from small companies. They never produce insight or problem solving in the acquirer. Most often, they produce pain, discomfort and write-offs.

They can, as is the case in the DowJones-CareerCast relationship, spawn enormous synergies. Long term executives like Tony Lee are able to somehow blend the short-view of an entrepreneur with a grasp of the rhythms of the longer play. Guiding a small operation through an equity stake is not for the weak-livered.

In the discussion surrounding the change of status, Craig Newmark (founder and CEO) was heard to say that the newspapers had better things to do than be scared of his operation. Although that's a little off the mark, it is true that any investment they might have made would have been unproductive. The problems that the newspaper industry faces in this market are surprisingly straightforward. While the answers may be hard to swallow, they are pretty obvious at this point.

In the job board market, there are two very real fronts: National and Niche. The National segment is a white collar marketplace and resembles the people who typically work in the newspapers: college graduates. Yahoo, Monster and CareerBuilder each serve the national market. (Were Ebay to join the fray, they would most likely try a national offering.)

The niche segment is a blend of things. From local newspaper markets to industry specific offerings to profession specific services, the emphasis in the niche market is a sense of 'localness'. Craigslist excels in its ability to create a sense of localness. Although that's what the newspapers need to learn, they were right to avoid a position on the board.

John Sumser

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