Online ads threaten newspapers

Classifieds have become the No. 4 reason people go online, ahead of sports and e-commerce, to combat the threat, many newspapers are now upselling their ads.

Local newspapers have enjoyed growth in classified print advertisements even as the number of listings for cars, jobs and real estate being posted to pure-play Internet companies increases. But at the recent Editor & Publisher Interactive Newspapers Conference, it was clear that newspapers still have reason to feel threatened by their online competitors.

"Are classifieds at risk? Yes," said Steve Ferber, executive vice president at Marks-Ferber Communications. "But newspapers can compete."

Classifieds have become the No. 4 reason people go online, ahead of sports and e-commerce, according to a study by Scarborough Research that showed local newspapers are still the first place people go to find cars, jobs and homes. A separate study for the Newspaper Association of America, however, showed that when people look for listings online, they're not going to newspaper sites most of the time.

"The race is so early on, but that window of opportunity is rapidly closing," said Charlene Li an analyst at Forrester Research. "I don't see most newspapers organizing themselves in the direction they should be going." Li recently co-authored a report that said print classifieds stand to suffer a 25 percent loss, or $5.6 billion, in 2005 as a result of Net listings.

Online job listings are among the most threatening, thanks to TMP Worldwide's Media Metrix found that the site had a 54 percent share of people looking for jobs online in December. Monster generates its revenue by selling employers access to its resume database, through employer job postings and through banner ads on the site. From these sources, Monster received $117.2 million in commission and fees for the fourth quarter of 2000 and $350 million for all of 2000.


Newspapers have the local brand recognition and knowledge of the area, but online sites such as Monster tend to be cheaper than print, let ads run longer and reach a bigger audience.

If the market becomes more price sensitive amid a slowing economy, companies and individuals placing classifieds may opt for the cheaper option of online, said Lauren Fine, first vice president of fundamental equity research at Merrill Lynch & Co.

To combat the threat, many online newspapers are now upselling their classifieds, often bundling an online listing with a print one. The Los Angeles Times, for example, is challenging its sales force to seamlessly offer ads across both mediums by adding an Internet component to compensation plans.

But Li said newspapers need to accept that many companies don't want to pay the higher prices for print listings, and should offer the option to buy just Web space.

To reach a national audience, many newspapers are pooling their listings in classified networks such as Abracat, CareerBuilder and Classified Ventures. CareerBuilder expects to grow more than 50 percent from the fourth quarter of 2000 to the first quarter of 2001.

"Eighty-five percent of all jobs are advertised and filled in the local area," said Robert McGovern, CareerBuilder's chairman and chief executive. "The problem you have with big bulletin board models is if you're trying to hire someone for a job in New York, you have to get resumes from all over the country. [With CareerBuilder] you'd advertise on and get almost a pure audience."