Newspapers
Papers feel the heat over classified ads
By Lisa Snedeker
Apr 26, 2007, 01:07

It's an old story that newspapers are losing classified advertising, and it's been going on since well before the internet.

What's interesting is where that classified business is going. It's not just to the internet but to virtually all forms of competing media, from radio to local TV stations to other print outlets and even to digital devices.

And the pace is accelerating, according to a new report, as the competitors go after the business more aggressively.

"It just gets tougher and tougher for a newspaper to maintain a monopoly position environment in classified advertising," observes Peter Zollman, founder of Classified Intelligence, a consulting firm that tracks classified advertising, which released the study.

This is trouble for newspapers, and it goes beyond simply the loss of revenue, though that’s certainly a huge issue in itself. Billions of dollars are at stake.

Longer-term, the trend raises new worries about the future of local papers as the go-to destination for readers, whether in print or online, in an increasingly digital era. Newspapers are positioned to be that destination but analysts warn that many are at risk of losing out if they fail to build dynamic, expansive web sites that are true community destinations.

As Zollman notes, those competing media in some cases are simply better venues for classifieds. For example, someone shopping for a house online can learn a lot more seeing it online than by reading a newspaper print ad. Says he: "Not only can you look at how many beds and baths, you can see a video clip and look at the surrounding neighborhood online."

Local TV stations in particular are chasing the classified business, and getting more if it, says Zollman.

Increasingly they see classifieds not just as a valuable revenue stream but as a way to build community, he says. They also don't have to charge as much as newspapers. "If they focus on it, they can take it away from newspapers, and that’s what we are starting to see," he says.

Classifieds are offered by TV station sites in all top 50 U.S. markets, according to the report, and by radio station sites in 47 of those markets, as well as by the majority of cable systems.

Classifieds have traditionally made up about 30 percent of newspapers' ad revenue, and last year they brought in nearly $17 billion, according to the Newspaper Association of America. But that was down nearly 2 percent from 2005. Auto classifieds were down nearly 13 percent, for a third straight year of declines, and job ads fell 7.5 percent.

Real estate was up 11 percent but that sector is now in a tumble with the collapse of the real estate market, and some papers are now reporting steep declines.

"During the last couple of weeks what was a steady downhill slide has become an absolute torrent," says Zollman. He reports double-digit declines in real estate and automotive, and he says recruitment is down double digits except in small markets.

"When three of your core products are down double digits, you are facing tough times," says Zollman. "You can see that in the layoffs announcements at newspapers, and there are more to come.”