In the early 90's, and for some time afterward, the newspaper industry had an opportunity to lead in the development of online classifieds and, in a number of forums, I actively encouraged them to take the opportunity... Today, I argue that they shouldn't put much effort into online classified ads. What made sense 15 years ago is no longer sensible.
In the early 90's, even as Internet technology was being rapidly deployed, there was still very little commerce on the Internet. The newspapers came to this new environment with an existing database of classifieds, relationships with vast numbers of advertisers, and a clear position in the minds of Internet users who had learned, through years of exposure to the paper-based pre-Internet world, that newspapers is where you went to find classifieds and job postings.
Given this opportunity, the newspapers could have not only maintained the revenue streams that then supported them, they could have vastly increased those revenues. What is the ad business of Google today, what is eBay or Monster today, could have been (some would say *should* have been) a business created, owned and dominated by newspapers. Of course, as we now know, the newspapers forfeited their historical franchise in classifieds and advertising. The result is that they will probably never recover from the loss of those revenue streams. As a secondary result of their forfeiture of these revenues, we, as a society, are now faced with the problem of finding an alternative means to fund and organize the paper-free dissemination of the news and information that we require. The newspapers have done more than just hurt their stockholders, they have failed the society that they once claimed they had a special duty and privilege to support.
But, by simply forfeiting the opportunity, it is probably the case that the newspapers simply sped up the working of inevitable economic processes. The advantage the newspapers once had was a temporary one based on the dynamics of an older and rapidly obsolescing technology. Their advantage wasn't rooted in any inherent binding between the business of journalism and the business of advertising. As such, it was always inevitable that news and ads would become distinct businesses.