eBay Takes On Craigslist

Well-known eBay features, such as the auction format, ratings and feedback system -- and its key PayPal payment service -- can contribute to taking the buying and selling of local goods to the next level.

eBay also is probably the most sophisticated user of search advertising in the world, and this will enable it to cheaply drive interested users to the site.

"We will certainly leverage what we have learned with search advertising in this new arena," says Mallabo. He says the company is currently relying on world-of-mouth marketing, and initial results are bullish thus far. The company will launch a direct marketing campaign using search advertising later in the month.

eBay's move is undoubtedly aggressive and heavy-handed. After all, eBay's main competition is now a company in which it owns a 25% stake.

But given Craigslist's casual attitude toward maximizing profit -- its CEO has told Wall Street that its guiding mission is simply helping people find cars, jobs and dates -- eBay may have felt it needed a more direct route to take advantage of a lucrative market that hadn't been fully capitalized on.

That's especially true given that eBay's stock, which traded recently at $33.41 , has traded sideways for about three and a half years. The company and its investors are hungry for growth opportunities. Encroaching further onto Craigslist's turf seems to be a price eBay was willing to pay.