Since the internet exploded into the zeitgeist years ago, I always believed ebay was the most elegant business model around. Forget the Pez hooey, its founder sought to create the perfect marketplace. He seems to have succeeded.

But is there one better? Enter Craigslist. What Craig Newmark's creation has pointed up is twofold: (1) Everyone loves a free lunch. And (2) that "all politics is local." I know, it's commerce. But it is the local twist that is the critical distinction. These two characteristics may enable it to be an ebay killer, or at least a very painful thorn in ebay's side. I think ebay's stock price is evidencing this lately.

Craigslist was way early in what will prove to be the web's next logical wave of mass applications, that being robust services aimed at local use. What these applications are going to do is leverage the integration of previously fractured/random data that has been collected, aggregated and presented in a way that let's the end user make educated decisions based on the database of collected information. And it's all focused in our backyards, what's really important to our daily lives. Look at Judy's Book and Insider Pages for examples of this.

Does this spell the end of ebay's dominance? Not necessarily. But the free lunch part is the curveball. Can any company, group, co-op, loose confederation etc. continue to do what Craigslist does indefinitely without designs on reaping a profit from its efforts? Look, it costs money to run the servers, maintain the website etc. etc. Unless someone has deep pockets and wants to foot the bill out of sheer goodwill, eventually the entity will look to make some money to at least cover costs. Maybe that's why Craigs charges for job listings.

But maybe this is actually another spin on the open source riff. Maybe Craigs, with its lean staff, can pull this off for longer than most expect. If that's the case, ebay is in trouble because it's tough to compete on cost against free. Craigs will have cost in its favor along with its depth of local content.

Cost is really out of ebay's hands in a sense. It is a for profit corporation going up against a challenger that isn't looking to make any real money. But the true legacy here is more likely to be ebay's failure to appreciate that local apps are destined to be where things happen in the future. Ebay should have had a far more robust and appealing "local marketplace" feature long, long ago. It didn't - it either took its eye off the ball or more likely didn't see the pitch coming. Meg Whitman received far too much praise for running a company during its hypergrowth phase. Sure it requires skill to keep it on track, but the train was rocketing without much effort. The true visionary does all that's required to navigate the hypergrowth but also looks to tomorrow when the bloom starts coming off the rose. Where's that next flower going to come from.

It's local apps and I fear ebay lost a golden opportunity. But that's really like all markets through recorded history. The nimble upstart grabs the brass ring from the incumbent because the upstart is down in the weeds looking for opportunity. The incumbent is too busy patting himself on the back.

Finally, don't forget ebay bought 25% of Craigslist from an ex-employee late last year. Keep your friends close but your enemies closer? We'll see.