Craigslist, Classifieds, Correlation and Causation
Posted by Greg on June 15, 2009
I’ve heard lots of commentary about this chart from Silicon Alley Insider supposedly proving that “Newspaper billions become Craigslist millions.”
I’m not disputing the broader conclusion — clearly newspapers advertisements have lost a lot of value, clearly Craigslist has taken only a small percentage of that value, and clearly some of it has simply disappeared. But this chart proves nothing of the sort.
First, the notion that all of the lost value in newspaper advertising has either gone to Craigslist or vanished into the ether is ridiculous on its face. I would imagine that far more of the money that would have otherwise been spent on newspaper ads has gone to Google, Amazon, eBay, Monster.com, and many other media outlets. Second, all this chart actually shows is that a small, barely-for-profit company has revenues that are orders of magnitude lower than the sum total of a large number of companies in an established industry.
For a good illustration of how silly it is to draw conclusions based on such data, consider the following revenue comparison (which I threw together in about five minutes) between Facebook and GM over the past four years:
Does this graph prove automotive billions have become social-networking millions? Or do I need to come up with something more symmetrical?
