I don't have any insight into classifieds usage there, but casual observation indicates the postings are pretty thin (and one Battelle commenter says "it's not used much"). Over time that might change perhaps if Murdoch focuses more attention and energy on it — but does he want to "cannibalize" the traditional product (he owns newspapers, remember)?
So what do Google and Craigslist have in common? Craigslist is the "Google of Classifieds" and Google is the "Craigslist of Search" (I'm kidding about that). (Here's a good article on Craigslist from Fortune.)
Both sites grew organically over time because they offered something that users perceived was missing elsewhere. They're both dominant in their respective arenas, and everyone is eager to topple them from their respective perches. It harkens back to the boxing days of yore — e.g., "The Thrilla in Manilla." I can hear the taunting now …
Everyone has now decided that they need a classifieds play, partly from observing how powerful Craigslist has become (from MSN to eBay to MySpace) and partly because it's a big market — $2+ billion online, $16+ billion offline (US).
Online classifieds are already competitive and fragmented. More sites will mean not only more fragmentation, but also a likely reinforcement of the market leaders' positions (as search has become more competitive, Google has remained in the top position).
That's the paradox of increasing competition: inertia.
As with many other areas online, there are likely to be a handful of highly successful sites: verticals (Jobs, Cars, Real Estate, Dating); "horizontal" classifieds sites and aggregators (e.g., CL, LiveDeal, maybe Oodle); and a number of sites — MySpace is probably in this camp — for which classifieds are a sideline (LinkedIn is another).
With the entry of MSN ("Fremont" aka Windows Live Classifieds) into online classifieds, 2006 should be a year of increasing competition and some greater clarity on how classifieds will or won't be integrated into Local Search — and, most importantly, whether the newspapers are going to be competitive with online classifieds.