Finding Revenue in The Classifieds

Newspapers are doomed. Or so it may seem.

The young, the hip and the Web-savvy are
going online for their classifieds, and ad dollars are following.

So if classified ad revenue, old media’s mainstay tributary, is
drying up, one question remains: With what will we line the
birdcages of the future?

At least, so goes the conventional wisdom.

But others say traditional media is in line to gain as much as anybody from the online consumer. And they say the growth of online classifieds won’t kill print newspapers, but rather will help them thrive.

This contrarian view is not accepted on Wall Street and in some advertising circles.

Share prices at large newspaper companies, such as the Tribune Company
and Knight-Ridder , continue to slide or
remain stagnant as profits drop and jobs are cut.

Don’t underestimate the online threat, said Ari Jacoby, traditional
media advocate and president of advertising firm Voicestar.

“Traditional media is losing advertisers right and left to online
advertisers like Google and Craigslist,” Jacoby told
internetnews.com.

Craigslist.org, for the not-so-young, hip or Web-savvy, is a popular
community-based Web site that lists classified ads for free. It began making headway into print’s revenue two years ago.

According to Jim Townsend, the principal and editorial director of
consulting firm Classified Intelligence, “free” is hard to compete
against.

“Free isn’t exactly a good business model for newspapers,” Townsend
told internetnews.com.

“[Newspapers] have been struggling for quite a while now against a
model that would give away what they would charge for,” Townsend said.

In February, Craigslist had more page views than the top 20 newspaper sites
combined, according to Nielsen//NetRatings.

Struggling, but not failing, some would argue. Experts like Jacoby, though wary, are still optimistic about the future of old media.

“Traditional media is being unfairly devalued by the marketplace,” he said.

While Craigslist and other online-only media have seen tremendous growth over the past few years, online newspaper sites have, as well.

The top 20 newspapers boast five times more unique viewers than Craigslist, despite trailing the site in combined Web page views, according
to Nielsen//NetRatings.

And that number grew by 21 percent from December 2004 to December 2005.

That kind of growth, Jacoby said, is due to traditional media’s
“critical assets: long-term customer relationships, brand equity,
real readership, real editorial.”

So while there’s been a new-media explosion, newspapers have been
every bit a part of it. And it’s been because of their traditional
strengths.

The trick, Townsend said, is to leverage that new growth to protect
those long-term strengths.

“By far, the online growth, while still a much smaller slice of the
pie, is growing exponentially,” he said. “The issue for traditional
ad publishers is how to convert that kind of revenue.”

AdStar CEO Leslie Bernhard thinks the solution requires counter-intuitive thinking. AdStar is a software company that provides an
online marketplace for publishers and advertisers.

For a long time, she said, classified and major advertisers thought
“print first.” Online advertising was an afterthought. If advertisers
utilized the Web at all, it was only by repurposing print ads into
online banners.

But now there’s an industry of companies specializing in
repurposing print ads into more online-friendly formats.

Bernhard said that ubiquity is a sign of how many advertisers now
think Web first, second and only. Newspapers would do well to remind
their many new online advertisers of print’s viability.

“Newspapers all put up their Web sites and then neglected to realize
the potential of the space,” Bernhard told internetnews.com.
“Offering an online ad and not offering an offline component is absurd.”

Its absurd because, as Townsend noted, newspapers are growing
exponentially online, but even in growth, online advertising is only a
“small piece of the pie.”

Online classified advertising is not enough to save newspapers.
Online growth is only useful in the long-term if it’s leveraged
to protect the industry’s primary revenue: print advertising.

Bernhard said online advertisers are ready to be reminded.

She said
that when the Atlanta Journal-Constitution included a checkbox
in their online advertising forms that read, “Do you want this also
to go into the paper, click here,” 45 percent of the online advertisers
chose to run a print ad, too.

Nearly half of all advertisers who thought online first, second and
only, agreed to pay a little more to publish their ad in print.
That’s a large chunk of that exponential online growth.

And Bernhard says it’s plenty to keep print viable.

“If you really think about it, as opposed to taking
revenue away, it appears as if [new media] is bringing new revenue
from Web-oriented buyers to print publishers.”

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