08:39 AM EDT on Tuesday, September 27, 2005

BY ANDREA L. STAPE
Journal Staff Writer

PROVIDENCE -- A used diamond engagement ring is listed for $4,000. The ad says it's hardly been worn.

Welcome to Craig's List.

Craig's List is a classified advertisement site on the Internet that's part bulletin board, job-search engine, real-estate agent and psychologist. The California company has been operating a Providence-specific site since the beginning of last year, allowing Rhode Islanders to sell their furniture, get a job or get rid of the items breaking their hearts for free.

Typically, Craig's List regional sites take a year or more to catch hold in a new city, according to Jim Buckmaster, the company's chief executive officer, but with the number of students in Providence and its proximity to Boston, which has had a vibrant Craig's List for years, the Providence site "took off faster than most," said Buckmaster.

"Anytime anyone posts [a question on Craig's List], I always write back," said Jenn Barajas, an East Providence resident and self-proclaimed Craig's List nut. "It's crazy, I'm glued to it. Bought a dining room table. Sold a bedroom set. Bought a palm pilot."

Craig's List was launched in San Francisco in the mid-1990s by Craig Newmark, a former IBM engineer who started by compling a list of arts events in San Francisco. Now, with 175 sites in 50 states, Craig's List is providing people with a sense of virtual community that's missing from some physical communities. The company says more than 10 million people use Craig's List monthly, with more than 5 million classified ads posted on the site and 1 million messages posted in its online discussion forums each month.

The company is still run out of San Francisco, but over the past two years has launched a major expansion, setting up sites in more than 100 new cities in and outside the United States, including Lima, Peru, and Tijuana, Mexico.

Despite being free, Craig's List has created a successful business out of building community. The company generates revenue by charging employers in New York, San Francisco and Los Angeles to post job openings. Everyone else can advertise jobs, or cars, or look for love, for free. The company, which has just 18 employees all in California, is profitable, according to Buckmaster, and has been since 1999. The privately held company declined to release its financials.

Last year online auction giant eBay Inc. bought 25 percent of Craig's List when a shareholder decided to unload stock. The purchase price remains undisclosed.

"We aren't interested in borrowing money or taking venture capital. That's the alternative that appeals to us, staying in the black," said Buckmaster.

With user volume on the rise, the company is now thinking of charging employers in the Boston area posting fees and it might start charging apartment brokers listing fees in New York City to keep automated listing software from inundating the site with duplicate postings for apartments, said Buckmaster.

"At one point, just that one category in that one city was 20 percent of our total postings across all cities and categories because of the ridiculous overpostings," said Buckmaster.

Despite its success, Craig's List doesn't really have a five-year plan, he said. Craig's List is about filling users' needs, Buckmaster said during an interview last month while making a pit stop in Providence on the way to a friend's wedding. The company could easily generate significant revenue by selling advertisement space on the site, but the site remains ad-free because that's what consumers want, he said.

"We don't think in terms of market share and long-term revenue projections the way a typical company would," said Buckmaster. "Basically, everything we do is user-driven. If we hear it's going to be a problem for our users, it's going to be a problem for us."

That's what keeps people coming back. The no-frills Web page is organized by category and is easy to figure out, allowing people to drop into online conversations about wedding etiquette, or whatever, with ease, he said.

Last week, someone on the Providence housing discussion forum was looking for the average monthly price to rent a one-bedroom apartment around Benefit Street with heat and hot water included. Several weeks ago, a Rhode Island student was looking for a way to get down to New Orleans to help with Hurricane Katrina relief.

And since there's no charge per word or per line, people are able to write lengthy descriptions about the products they are selling and add pictures for free.

Some users became nervous that Craig's List's customer focus would get lost after eBay bought in, but it has stayed hands-off, said Buckmaster.

"It hasn't had nearly the effect that skeptics predicted. When the announcement went out, a lot of people were predicting the imminent demise of Craig's List," he said. "There really hasn't been any changes stemming from that."

While Buckmaster and founder Newmark -- who is still at the company -- remain laid back about business, some are not so relaxed. Craig's List is posing a dilemma for newspapers that have relied on classified ads for a steady revenue stream. Classified advertising revenue nationally at newspapers has been dropping annually since 2000, according to statistics compiled by the National Newspaper Association. Gary Pruitt, chief executive officer of the McClatchy newspaper chain, which publishes the Sacramento Bee, told stockholders during a conference call that the company is aware of the "Craig's List effect" on classified sales, according to the Wall Street Journal.

Buckmaster, though, downplays the issue.

"In reality though, I think 90 to 95 percent of classified revenue remains in print," said Buckmaster.

Analysts and media executives disagree. Some papers have decided to lower or completely waive fees for online classified advertising, and many have set up online discussion boards to compete with the site. But combating Craig's List may prove difficult with its recent rapid expansion, and its ability to hook users.

"Right now we're selling a bedroom set, we have a retro '70s table, we have a dog crate [up for sale]," said Barajas, who regularly e-mails Craig's List ads and discussion postings to her friends and family. "I'd say at least once a night I browse through my favorite sites. My father says I need a 12-step program to get off Craig's List."