Craigslist faces scrutiny over thriving red-light district

Reneges on promise to donate proceeds to charity

Craigslist is expected to boost revenue by a whopping 22 percent this year thanks in large part to fee-based postings in its adult services section, a new report concludes.

About one-third of the $122m Craigslist is expected to bring in in 2010 will come from the adult ads, which often promote the services of prostitutes, analysts from the Advanced Interactive Media Group estimate. Over the past year, the Web's 35th most trafficked website has doubled the fees for such ads and reneged on a promise to donate the proceeds to charities that work to prevent child exploitation and human trafficking.

As a result of the controversial move, sales from adult services will triple to about $36.3m compared with sales from 2009, the AIM Group said. It estimated profits would be about $88m. If correct, the figures mean Craigslist generates revenue of more than $4m per employee and per-employee profit of $2.9m to $3.2m.

Law enforcement authorities and anti-trafficking groups have criticized Craigslist for cashing in on the ads. The fees account for about 30 percent of its revenue, the second-largest category behind job recruitment postings, which generated 50 percent of its sales.

Last week, Connecticut Attorney General Richard Blumenthal sent a letter to Craigslist officials complaining of the continued presence of prostitution ads and asking what steps they were taking to curb them, according to The New York Times. He also called on Craigslist to disclose exactly how much money it's making from the ads and criticized the decision last May to stop donating the proceeds to charity.

In late 2008, Craigslist announced changes that for the first time required people posting to the site's red-light district to register using a valid credit card and telephone number. Those caught posting "inappropriate" ads were threatened with being blacklisted.

Since then, officials in the Illinois attorney general's office have counted more than 200,000 sex ads in the Chicago section of Craigslist alone, The Times said. Last week, federal prosecutors accused members of the notorious Gambino crime family of using Craigslist to sell the sexual services of girls as young as 15 years old. ®

Sponsored: Driving business with continuous operational intelligence