Legal fisticuffs are flying between Craigslist and eBay (Nasdaq: EBAY).
It is about time the two began airing their grievances. This marriage never smelled right. Ever since eBay negotiated with Craigslist's board to acquire a 28.4% stake in the free classified website four years ago, it was just a matter of time before things blew up. One can sleep with the enemy for only so long.
The conflict started churning last month, when eBay filed a legal complaint alleging that Craigslist founder Craig Newmark and CEO Jim Buckmaster had set out to dilute eBay's stake in the site earlier this year.
Craigslist filed a countersuit today, alleging several misdeeds on eBay's behalf, including:
- Launching its competitive Kijiji site after eyeing confidential Craigslist information
- Putting misleading ads on Google (Nasdaq: GOOG), where the sponsored listings named Craigslist but actually funneled leads to Kijiji
- Calling Kijiji a "Craiglist killer" within the company.
The Google claim is intriguing. Paid search giants like Google and Yahoo! (Nasdaq: YHOO) have come under fire for letting competitors bid on rival keyword names. The search engines have tightened up their policies in response, but one has to wonder if Craigslist will start firing at Google next.
Google Base is no Craigslist killer -- or a slayer of eBay, Amazon.com (Nasdaq: AMZN), or Overstock.com (Nasdaq: OSTK) for that matter. But a company that swears off online advertising, as Craigslist has done, has little reason to play nice with Google.
Craigslist wants damages, including the return of eBay's minority stake in the company. Even if eBay no longer needs Craigslist, it won't surrender the shares.
If there's a moral to this story, it's that Craiglist may be paying the price for its reluctance to commercialize its site. Beyond charging for corporate job listings in key markets or brokered apartments in New York City, Craigslist has never given in to the display ads or paid listings throughout the site. So if this becomes a prolonged legal battle, eBay is the one with bigger bucks.
Purists will argue that I'm wrong. Hey, I hear you. I love the fast-loading, easy-on-the-eyes Craigslist site. However, the real-world reality is that money eventually becomes a competitive factor. Just because antimonetization companies like Craigslist and Wikipedia are on top of the world doesn't mean that some incentive-saddled mousetrap-maker won't one day take them down.
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