Craigslist is the unsung hero of the on-demand economy

The stars of Silicon Valley’s on-demand economy—Uber, Lyft, Postmates, and their ilk—are known for sleek apps designed with extreme attention to detail, and focused on creating a seamless experience for their customers. But these companies wouldn’t exist—at least not in the forms we know them today—without the existence of a janky, hard-to-use 20-year-old classifieds site that looks like it was last updated in the MS-DOS era.

I’m talking, of course, about Craigslist. The Web 1.0 clearinghouse for jobs, goods, and services has been critical to the growth of companies like Uber and Lyft, which use it to recruit drivers at the staggering rate needed to keep up with passenger demand. Without Craigslist, on-demand companies would have to pound the pavement looking for more people to provide their services. And there’s no guarantee they would find them.

Yesterday, Zen99, a company that provides information for so-called “1099 workers,” released a study of Craigslist’s effects on the on-demand economy (and vice versa). The study scraped Craigslist for listings posted by the largest on-demand companies in Silicon Valley on a random day in March, in 10 major U.S. cities including New York, Los Angeles, and San Francisco. The findings were staggering.

According to Zen99’s estimates, Uber, Lyft, Instacart, and Postmates will spend a combined $8 million annually just on Craigslist ads. (Most Craigslist postings are free, but the site charges companies $25 per listing for jobs posted in major U.S. cities.) On March 15 alone, Zen99 estimates that Uber spent $7,225 to place driver ads on Craigslist—which isn’t surprising, considering how many listings a cursory search of San Francisco’s site turned up.

Despite trouncing other on-demand companies when it comes to money in the bank, Uber actually wasn’t the biggest spender in the study. That was Postmates, the deliver-anything app, which spent $5,325 on Craigslist ads in San Francisco, and $8,375 in the ten-city group. On an annual basis, that adds up to more than $3 million spent just to recruit delivery couriers on a single site. (One explanation may be that, since Uber is far better-known than Postmates, more of its recruiting happens by word-of-mouth, or through its referral program.)

In addition to studying Craigslist data, Zen99 measured the change in cost of Google AdWords ads for certain popular search terms like “delivery driver” and “uber driver job.” Most of the keyword searches had gotten at least 50 percent more expensive since March of last year; one search, “part time jobs sf,” had increased in price by 250 percent in a year, indicating that many more companies are trying to advertise against those terms.

On-demand companies have proven that they’re willing to spend millions in order to keep their ranks stocked with drivers and other providers. (Lyft’s now-infamous offer of $1,000 per new driver sign-up is just the latest mad dash for labor supply, and it won’t be the biggest—the company has reportedly budgeted $50 million for driver acquisition in 2015.)

Whether or not these Craigslist efforts result in success for the companies doing the hiring, they’ve no doubt been a boon to Craigslist itself. There’s no better customer for a job posting site than a tech company with a need for a huge army of contract laborers, all paid at low hourly rates and subject to huge amounts of turnover. And as Uber and Lyft grow, so, too, will their dependence on Craigslist. Unless, that is, they decide to disrupt the classifieds market as well.