What!? Classifieds have been around for forever and were the bread and butter of the print newspapers for a long time. If craigslist "took on" anything, it's classifieds.
The "second-hand random stuff" market that ebay had previously was just made easier (and cheaper) by craigslist, but only for local items.
The thing I'm pointing out, is that given all the online newspapers, and startups probably to do it, I'm surprised Craigslist could take off.
You make it sound like craigslist is some recent newcomer to the internet classified scene. whois craigslist.com shows "Record created on 24-Sep-1997". Craigslist was most likely the first to do and popularize on-line classifies, and figured out all the tech and social changes to do it. Online newspapers never have concentrated on on-line classified and are just now doing that in order to have a decent on-line offering that keeps people coming back. There are even whitebox classified engines that companies like radio stations can stick on their websites to encourage traffic. None of them will beat craigslist though.
My second point about it starting as SF is: In 2005 or so, when I read about CL, the site was only SF, and was pretty small.
I'm sure craigslist has had city listings for places other than San Francisco since before 2005 (maybe not too long before). But San Francisco is a good place to build up a userbase of on-line users because the culture is welcoming to on-line interaction and everyone is so wired (at least compared to other cities).
But the initial concept of a listing for a small town (whether it be San Francisco or not) is laughable.