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Disgraced stock analyst Henry Blodget pauses to dream up a fantasy valuation for Craigslist, and comes up with $5 billion. The numbers he relies on are faulty, starting with Craigslist's revenues. Blodget relies on a recent report by Classified Intelligence, which pegs its revenues for 2008 at an estimated $81 million. That's extremely low; insiders tell me the real figure for last year was in the range of $100 million to $150 million.

Blodget's costs, too, are off base. He estimates per-employee labor costs at $125,000, reasoning that founder Craig Newmark and CEO Jim Buckmaster run things "like a nonprofit." Try "like a prison camp," Hank; Newmark and Buckmaster pay ludicrously low salaries and don't offer any equity, having learned from their (highly profitable) mistake in issuing shares to an early employee. True labor costs are more likely in the range of $4 million to $5 million. A commenter on Blodget's post revises his estimate of bandwidth and server costs down from $50 million a year to a more realistic $7.5 million. That gives you a business with something like 90 percent profit margins. Where does the money go? Not to the Craigslist Foundation, by and large. Mostly straight into Newmark and Buckmaster's pockets, from what we understand.

Blodget then goes on to suggest ways Craigslist could be making more money. Why not start charging for erotic services ads, since people like Connecticut attorney general Richard Blumenthal are already inclined to believe Google profits from prostitution? That seems easier.