Newspaper Classifieds: A franchise lost.

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.

The situation of newspapers in the early 90's was much like that of the many organizations that grew up as Internet Service Providers (ISPs). Those companies always knew that their opportunity was only temporary at best. It was always clear that the "proper" provider of Internet connectivity was either the phone or cable TV companies. But, since the phone and cable providers were slow to move, there was a temporary opportunity to profit from their lethargy. Thus, we saw the temporary growth (sometimes spectacular) of companies like AOL, Earthlink, and many thousands of others. Today, of course, inevitable economic processes have caused the "right" or "natural" thing to happen and the independent ISPs are consolidating or simply going out of business. Today, Internet connectivity is normally provided by those who have the cost, service and technology advantage -- the phone and cable companies... Nonetheless, quite a few sport cars, homes, and college educations were paid for by the revenues from those who took temporary advantage of the phone and cable companies' slowness to move. We have also seen the creation of a great number of companies based on what was learned by those who stood in temporarily for the phone and cable companies.

The classifieds and advertising business is very different from the business of journalism. Thus, one might wonder why the two were ever so closely tied. Of course, the connection was as loose one and, as we've seen, a fragile one. The connection between these two came about simply because both required access to the same limited, scarce resource -- the paper on which they were printed, the paper that was distributed throughout communities. What developed early in the history of newspapers was a pattern of printing what was really two publications in one. The paper was split into a news section (sprinkled with non-classified ads) and a printed database of classified ads in the back. Since both rode on the same paper, it was only those who owned the printing presses that owned both of these businesses.

Today, the channel is the Internet. Paper is dying rapidly. No one owns the Internet and access to it is essentially universal. As such, there is no channel-access driver that forces the classified ads and journalism to be owned in common. Given that there is no longer a natural binding between these two businesses, we can be sure that they would have eventually broken apart -- even if the papers had taken the opportunity that they once had to lead in online classified ads. We can also imagine that there would have inevitably grown up competition in classified ads from non-newspaper sources. For instance, we probably still would have seen businesses like eBay, Monster or Craigslist innovate in ways that newspapers didn't. The incumbent's inevitable efforts to expand their offerings to address competition would have, over time, caused those on the classified advertising side of the business to demand that they be set free of their bonds to the news side of the business. In time, we would have gotten to where we are today -- online journalism and online classified ads being distinct businesses. But, what would have been different?

Had the newspapers taken the opportunity to build serious classified businesses online, they would have also seen more clearly the opportunity and value in growing online audiences for news. The result, I'm sure, is that online news today would be very different than it is. We would have benefited from the best minds in the newspaper businesses spending the last 15 years thinking about how to do online news better in order to increase traffic to their revenue producing classified ads instead of what we got -- the best minds trying to figure out how to resist the pressure to go online and maintain their paper-based revenues. My bet is that if the papers had enjoyed years of the same online revenue streams that companies like eBay, Monster, etc. have seen, there would actually be far fewer paper-based newspapers today... The newspaper business would have learned long ago that better margins are found online.

So, where does that leave us today? Should the newspapers try at this late date to recover the online classified business? No. That would be, I am sure, a hopeless task. The opportunity is lost, the window closed. You can only fight economics temporarily and then only at specific moments in the development of an economy or market. The time for this particular battle is long over. For a newspaper to build an online classified business today would be sort of like someone building a new Internet Service Provider to compete with the phone or cable companies... It's just not worth the bother unless the technology is distinctly and greatly different.

bob wyman

Comments

[Eugene Jen]

Hi Bob,

I happened to bump into an article by Nick Carr today. http://www.roughtype.com/archives/2008/06/was_ebay_a_fad.php

We know Craigslist is built on enabling customers to easily post ads with minimum cost. This capability at the same time also helps con artists and spammers to use it just like the current eBay. So what if the newspaper publishers position themselves as an alternative to Craigslist by enabling authentication or verification? And by adding cost to spammers and scam artists to reduce the noise?

[Rick Waghorn]

Which is fine... until you ask them to drop their geography... that's where their real problems lie. Becoming geography-lite.

[Garrett]

This post is on the money:

According to my publisher, my paper is down $75 million from the classified high. He views that money as gone.

[Auto oglasi]

Thats is not correct..."It's just not worth the bother unless the technology is distinctly and greatly different."

[Jeff Paul Internet Business]

Well i must say eBay, Monster or Craigslist innovate in ways that newspapers didn't. and they are really powerfull for boosting your ebusiness by getting quality traffic.