eBay Takes On Craigslist

Oh, and keep in mind the invaluable lessons eBay has learned by peering over Craigslist's shoulder for the last three years. That will give eBay a big advantage as opposed to starting from scratch.

The success or failure of community-type Web sites can hinge on small decisions that take years of trial and error to iron out. But eBay has learned tricks such as when to remove problem users or how to solicit feedback from the best in the game.

The size of the market, meanwhile, remains huge. UBS analyst Ben Schachter believes it could rival the size of eBay's core search business -- which generated revenue of $1.3 billion in the first quarter -- over time. "To get some of idea of the potential market size and opportunity, think of what Craigslist has achieved despite the fact that it has shown zero interest in even attempting to maximize revenue," he wrote in a research note on Friday.

Schachter estimates that Craigslist brings in between $50 million and $70 million in revenue per year, just by charging for job listings in select cities and apartments listings in New York. (UBS makes a market in eBay shares.)

eBay's aggressive push into the local listings market is likely to be felt by traditional newspaper companies as well. Already bruised by the migration of classified ad dollars online, major local groups like Gannett(GCI Quote) and McClatchy (MNI Quote) are going to be further pressured by competition from eBay.