Classified ads plunge to $6bn from $19.6bn in 2000

Classified ads used to be an important revenue source for newspapers. Craigslist, and other online services, have had a huge impact on this industry.

Rick Edmonds, over on Poynter Online, notes that the classified ads sector dropped to $6 billion in 2009. This compares with $10 billion in 2008, and $19.6 billion in 2000. Classified ads used to be a basic bread-and-butter revenue source for newspapers. It helped subsidize news gathering operations, and it is the loss of this important source of revenue that is partly to blame for the newspaper industry's financial troubles.

The reduction in the value of the classified ads market is not a measure of the number of classified ads. There are still masses of classified ads, it's just that they cost nearly nothing to post, if you use Craigslist.

There are about 30 people working at Craigslist. This small team has managed to pull tens of billions of dollars out of the classified ads sector over the past decade. And it has replaced the work of tens of thousands of people that used to work in newspaper classified ads departments.

And Craigslist doesn't charge for most of its classified ads because it doesn't want to. And it doesn't need to. Servers and bandwidth are fairly cheap and Craigslist's paid job ads cover all the costs of the business.

For newspapers, it's difficult to compete with a business that doesn't want to profit from your bread-and-butter revenues. It's one thing to have a competitor 'eat your lunch,' but in this case, Craigslist takes the lunch away and doesn't bother eating it. If Craigslist did charge for classified ads, that would at least, provide newspapers with something to compete against.

I don't mean to criticize Craigslist, I'm a huge fan and I have tremendous admiration for Craig Newmark, the founder, and Jim Buckmaster, the CEO. I see them fairly often around San Francisco, where I live.

But Craigslist is an excellent example of how the Internet can be used to devalue a large industry sector. And I mean 'devalue' in a strictly monetary sense -- Craigslist's free ads create a massive amount of value as social capital.

Please see: The Internet devalues everything it touches . . .