Silicon Alley Insider Henry Blodget recently wrote a post that Craigslist was worth $5 billion. It’s an interesting question to consider what Craigslist might be worth, and Blodget runs through what appears to be a decent, back-of-the-envelope type analysis. But in the end, the valuation of $5B is overstated and the entire exercise is just as pointless as Kyle and his South Park buddies handing the Canadian government official a check backed in the currency of theoretical internet dollars to end his country’s strike.

Craigslist is basically run as a non-profit, its growth and sustainability are nearly entirely attributable to the fact that it allows free listings, and its business model depends upon those millions of free listings to generate the type of traffic the site enjoys. Blodget’s costs are underestimated, as are his estimates of customer defections, while his multiples and revenue projections are extremely high (since when is 10x revenue a very conservative multiple?). More importantly, Blodget wildly underestimates the deafening uproar that would ensue once the concept of fully monetizing the site was introduced. What happened recently to Facebook serves as a small hint of how ferocious online communities can be, and my guess is that Craigslist’s community of users is among the most zealous. The change that Blodget proposes would cause rapid and massive revolt and the site would quickly become a hollow, abandoned shell of what it is today.

Craigslist is an incredible phenomena. It’s growth and traffic numbers are staggering and the site clearly delivers enormous value to its users. And while Craigslist possesses substantial value, it’s not worth $5 billion by any stretch of the imagination.

As an aside, the South Park episode, ‘Canada on Strike,’ contains one of the all-time great South Park scenes, certainly in the top 10. As Canada goes on strike (the episode is a complete mockery of the writers’ strike), Kyle, Stan, Cartman, and Butters turn to the web to raise the funds necessary to end the impasse. Butters’ YouTube video becomes a hit, and they go to the internet office to collect their money. Sitting in the lobby waiting to also collect their long-awaited windfall are the Star Wars kid, Chocolate Rain, sneezing panda, laughing baby, Ninja Afro, the Tron guy, and the ‘leave Britney alone’ freak. After all these YouTube stars kill one another off, Kyle finally collects his payment in ‘theoretical dollars.’ It’s yet another hysterical and brilliant South Park commentary.

Tags: Silicon Alley Insider, Henry Blodget, Craigslist, What Is Craigslist Worth, Online Classifieds Site. Free Classifieds, Online Communities, Passionate Online Communities, South Park, Canada On Strike, Theoretical Internet Dollars, Star Wars Kid, Chocolate Rain, Laughing Baby, Sneezing Panda, Ninja Afro, Tron, Leave Britney Alone, Britney Spears, Piercing Satire, The Writers’ Strike