Memo To Newspapers: Online Yellow Pages Are Key

Online classifieds and job listing sites continue eating into newspapers' bread-and-butter classified listings, but there's plenty newspapers can do to find new economics alongside popular sites such as Craigslist, according to a new report.

Called "Competing with Craig: Strategies and tactics for battling Craigslist and its counterparts," the report by research and consulting firm Classified Intelligence said Craigslist has cost newspapers in the San Francisco Bay Area $50 million to $65 million in employment advertising revenue. The free community Web site generates more than 1 billion page views each month.

The study said employment advertising accounts for about 19 percent of newspapers' revenue, and focused on the impact of popular listing communities such as Craigslist on Bay Area newspapers. Overall, classified advertising represents a $28 billion to $30 billion business (combined) in the United States, including $16 billion in daily newspapers, according to the study, which used data from the Newspaper Association of America in compiling its figures.

It's no secret that newspapers have been getting hurt by all sorts of all new online classified services in the past few years, said Peter Zollman, founding principal of Classified Intelligence. But the growth and continued popularity of sites like Craigslist, as well as job sites such as Monster.com and HotJobs, doesn't mean it's "game over" for newspaper publishers either, he told internetnews.com.

And it's not like they're sitting still anyway. After all, Careerbuilder.com is owned by three major newspaper publishers: USA Today publisher Gannett ; Knight-Ridder , which owns the Miami Herald; and Tribune Company , parent of The Chicago Tribune.

"Newspapers have a lot of opportunity in their markets. They have to understand the nature of [their] business is changing, and they have to change with it if they want to be the marketplace for their communities."

Zollman said community publishers in smaller to medium markets have opportunities to seize in order to stem the flow of classified dollars that are heading for online recruitment sites.

For one, "stop thinking like a newspaper," the report said, and pay attention to the hybrid classifieds and Yellow Pages-style listings offered online. "Yellow-page publishers are moving into classifieds; dot-com classifieds are growing, and many broadcasters are improving their classified offerings," Zollman said. "As the business becomes even more competitive than it has been, consumers will benefit from more efficient marketplaces and advertisers will find improved services. Only publishers who don't keep up with the changes will lose."

The shift is well under way. Zollman pointed to Sweden and Australia, where leading publishers of Yellow Pages directories have purchased trading post companies similar to Craigslist.

In the United States, publisher Gannett Company recently acquired HomeTown Communications Network, which offers online Web listing services along with newspapers, telephone directories, shoppers and niche publications in Michigan, Ohio and Kentucky.

Hearst, another major U.S. publisher, is pursuing Yellow Pages listings and services, such as its purchase of White Directory Publishers of Buffalo, N.Y., the fourth-largest independent yellow pages publisher in the United States.

"It's starting to become a bit of a merger of what's in Yellow Pages and what's in a classified ad," Zollman said. "There is not a distinction like there used to be. Suddenly you have a situation where Yellow Pages can publish classifieds. Newspapers offer Yellow Pages. That trend will definitely continue in 2005."

The 57-page report offered a lengthy list of strategies for any player in the sector in order to help them develop more effective products for auto, employment, real estate and merchandise advertising. But it also offered newspapers direct suggestions:

• Immediately begin offering free online-only classifieds, at minimum in every category outside of real estate, recruitment, autos and rentals. Strongly consider making all categories free online for the next few years.
• Create a simple self-service method for individuals to post ads online. Rebuild a vital marketplace online and you will make money from that marketplace in many ways going forward. Plus, the margins on that business will be breathtaking.
• Throw significant energy at building easy tools for business classified customers, auto dealers, etc., to simplify their use of your online classifieds. In this way, expand your existing advantage over Craigslist.
• Promote the free online ads like crazy in your print products and elsewhere. It doesn't do any good to launch something and not talk about it. Newspapers consistently refuse to promote their online efforts.
• Strongly encourage growth in your online merchandise categories. Your readers should expect to find anything they want in your classifieds. That guarantees they'll view you as central. Business follows the buyers. Make sure you are the prime destination for buyers.
• Stop worrying about your own online unit eroding print classifieds. Print will erode as online grows; this is an unstoppable force. By focusing on dominating your market online, you ensure that a vibrant high-margin business will be yours in the end.
• Offer RSS feeds on classifieds that are selectable and highly targetable, so [customers] receive ads they want while not receiving material that's useless. Post ads immediately as they are posted or phoned in by sellers. Why wait until an overnight feed?

Although there may not be a lot to celebrate in the rise of online job listing sites, "newspapers still have distinct competitive advantages," Zollman added. "If they take advantage of what they have, there are strong opportunities. It's not like newspapering is going to die [from online classifieds].

"The reality is that newspapers are still a good business, but facing some very severe challenges, and not only from Craigslist, but from hundreds of other sites."