* Craigslist’s operating expenses are ridiculously low in relation to its huge size, allowing it to offer most services for free and still earn a profit. According to its public fact sheet, every month the site receives more than 50 million classified ads and serves more than 30 billion web pages.[1] Alexa ranks it as the ninth most-trafficked site in the US.[2] Yet somehow, the company manages to do this with just over 30 employees![1] On a per-year basis, that’s around 20 million classifieds per employee! Infrastructure costs are also very, very low in relation to traffic, as the site’s design, functionality, and interface are all ridiculously light and bare-bones.[3] No startup can match such ultra-low per-classified costs.
* While Craigstlist is technically a for-profit corporation, it operates as a non-profit organization,[1] so it is not seeking to maximize profits; instead, it is seeking only to be financially sustainable. Wealth-seeking entrepreneurs are at a huge disadvantage if they try to compete against a well-established entity that has both an ultra-low-cost advantage and no desire to acquire wealth over time.
In short, Craigslist possesses what Warren Buffett calls the “low-cost producer” advantage: it can offer a commodity service for less than anyone else.[4]
[1] http://www.craigslist.org/about/factsheet
[2] http://www.alexa.com/topsites/countries/US
[3] According to this 2011 presentation, Craiglist, the 9th most-traffic site in the US, is powered by only ~500 servers located in two data centers: http://www.slideshare.net/jzawodn/lessons-learned-migrating-...
[4] For example, read Buffett's description of GEICO’s competitive advantage in his 2000 letter to shareholders: http://www.berkshirehathaway.com/2000ar/2000letter.html