Yesterday, Fred wrote a post about what we can learn from the “mess” that is Craigslist.  The “mess” referred to a Wired article titled “Why Craigslist Is Such a Mess."  Fred explains why we at Union Square Ventures love this "mess” and refer to it frequently in posts and meetings with entrepreneurs.  Given how much I have personally referred to Craigslist as a model of succeeding with a less is more approach (in every way), I thought it would be good to also state clearly that I don’t think Craigslist is invincible or that entrepreneurs should not try to build businesses to compete with (parts of) Craigslist.

There are two trends that I believe contribute to the vulnerability of Craigslist.  The rise of the realtime web and the growth of the size of the market.

While Craigslist relies on community monitoring as a key governance mechanism at its heart is still a model that is a fairly direct translation from a physical world bulletin board.  If you want to list something you have to post it on the board.  If you want to find something you have to go to the board.  This is of course not unlike the first generation job sites, such as Monster and Hotjobs.  Those are now being disrupted by (vertical) search with companies such as Indeed (disclosure: a USV portfolio company).  You can post a job anywhere and Indeed will find it and make it available through search.  With the rise of the realtime web and the investments by Google and others in increasing the speed of search, it is entirely possible (not saying it will happen for sure) that other types of classified listings will lend themselves to a search model rather than a centralized model.  I might simply tweet that I am selling my used mountain bike.

Then there is the size of the market.  One of my favorite quotes from Adam Smith is a section title in Wealth of Nations: “That the Division of Labour is Limited by the Extent of the Market."  Craigslist got going at a time when online was still the exception not the rule for transactions.  We are now entering a time when almost any transaction will at least start online.  With a much larger market there is more room for specialized sites.  Take education for example.  It is true that people still offer and look for something like a cooking class on Craigslist right now, but a dedicated site such as Teachstreet has the opportunity to start skimming the best teachers and most dedicated students from the top of Craigslist.  Over time – with the right execution (and they are off to a great start) – such a site could become so much more compelling than Craigslit that it could suck up most of the "lifelong learning” type listings.  Now with only a small share of that oline that would not have been compelling, but when pretty much every search for a class starts online that becomes a huge opportunity.

So much as I personally admire Craig and Craigslist, I believe there is plenty of reason for him to (re)tweet “run, run, run” and there are real opportunities for entrepreneurs to compete.