• by Wendy Davis , Staff Writer @wendyndavis, May 1, 2008

Craigslist and eBay were always strange bedfellows. From the time eBay took a 28% stake in the profit-eschewing Craigslist, it was all but inevitable that the companies would end up in litigation.

Last week, eBay pulled the trigger, suing Craigslist for allegedly diluting the value of eBay's interest in the company to less than 25%, which meant that eBay lost some rights regarding its ability to elect a Craiglist director.

The dispute stems from a profound philosophical difference between the publicly traded, revenue-hungry eBay and Craigslist, which has time and again said it doesn't care about making money. Craigslist charges small fees for real estate listings and job listings in some cities, but most of the listings on the site are free.

EBay, realizing that online classifieds could bring in billions of dollars, apparently isn't happy with this state of affairs. Last summer, former eBay CEO Meg Whitman said she wanted to purchase outstanding shares of Craigslist. At the same time, Craigslist executives wanted to reclaim the shares from eBay and offered to buy back eBay's stake.

Meantime, eBay was forging ahead with its own classified service Kijiji, which launched abroad in 2005 and in the U.S. in 2007. Craigslist viewed the move as competitive, and allegedly diluted eBay's stock as a result.

Craigslist hasn't yet filed a response to the complaint, but the company is telling its side of the story on its blog. "As those who know us best will recognize, every measure we have taken has been for the sake of protecting the long term well-being of the craigslist community," the post states. "Sadly, we have an uncomfortably conflicted shareholder in our midst, one that is obsessed with dominating online classifieds for the purpose of maximizing its own profits."