With Two Of Every Three Dollars Of Newspaper Online Earnings Coming From Classifieds, Why Isn’t The Industry Ready To Enter The “Golden Era of Online Classifieds”?

According to a new study on global online newspaper classified advertising by the World Association of Newspapers, newspapers can do better, but not if they stay complacent. And the warning is out there – “Over the next five years, ad volume will significantly increase online and as much as 90% of all ads could be placed online directly,” according to Jane Glendall, digital director at Loot, the London-based classified magazine.

Some newspapers are further along than others, maintaining print classifieds and growing online. In digital-savvy Finland, all classified operations are profitable at the Helsingin Sanomat, according to Jarkko Kyttanen, classifieds manager. He says print still commands a substantial premium over online (remember the vast majority of print circulation sales in Finland are through annual subscriptions so circulation stays pretty steady) and online offers a lower cost because it has a lower cost base. He said the newspaper is looking ahead into a “Golden era of online classifieds.”

And one of the leading regional Finnish newspapers, Turun Sanomat, tells the survey it is expecting 10% increases in all classified areas this year, marking the first time that will have happened in 10 years, according to Kirsi Laine, classified advertising manager.

ftm background

LiveDeal Ties Up With AdStar – Now An Online Ad Can Be Automatically Fed to the Local Newspaper’s Print Edition
It seems a no-brainer – newspapers partner LiveDeal, a specialist in online classifieds, and let LiveDeal do all the site maintenance, keeping its technology up-to-date, and they share the revenue. The Toronto Star liked the idea so much it actually invested in LiveDeal and then set up its own Canadian site that has been very successful since its January start.

Now There Is A Way For Newspapers to Compete With Craigslist. Say Hello to LiveDeal
Newspapers know they stand to lose billions of dollars in classified advertising revenue to Craigslist, and many publishers have simply no idea how to compete against free ads. But now comes along LiveDeal, a Craigslist competitor that actually encourages newspapers to turn over their classifieds to a site LiveDeal will run for them on a revenue share basis. It’s aimed at local readership within a 50-mile radius of local postal codes, but it extends nationwide.

Wall Street Has Coined a New Term For the Advertising Difficulties Facing Traditional Media: Welcome to “Media Malaise”
With nearly all the traditional media advertising pointers for the rest of the year looking particularly sick, trust Wall Street to introduce the term that sums it all up. “Media Malaise” is forecast to be with us for some time to come!

With McKinsey Warning that Newspaper Classified Advertising Revenue Could Take a $4 billion Hit Within Two Years, Knight-Ridder Fights Back Offering Some Classifieds for Free On Most of Its Web Sites
McKinsey had warned newspaper publishers in April that their classified advertising revenue was going to take a $4 billion hit by 2007 – that’s about 9% of the $46.7 billion that newspapers earned from 2004 advertising. The losses are forecast because so much of that advertising is increasingly moving to the Internet where it is posted for free or for much less than a newspaper charges.

As If Metro Was Not Already Giving Publishers Heartburn by Taking Their Younger Readers
Now It Is Going For the Jugular Targeting Classified Advertising Revenues By Converging With New Web Sites

The report says the best news for newspaper print and online classifieds has come from recruitment advertising. “Newspapers have gained more in digital market share than they lost in print, reversing the decade long trend of an erosion of recruitment advertising,” the report said. It said newspapers now held 50.48% of the overall print and digital recruitment market, an improvement of the 48.94% in 2004.

But again the obvious question is – why do newspapers only control half that market. It was theirs to lose and they did. What are they doing to get it back? First glance shows it is more the economy improving than anything in particular that newspapers are doing to get back that business.

The report cites Denmark, another very advanced digital country, where the total value of online classified advertising is expected to jump this year to 10% from the 6-7% from 2005. But putting that into perspective, with online classified so much less expensive than print classified, it means that more than 50% of the volume in now online. And once a newspaper loses classified business it is very difficult to get back, as de Telegraaf in The Netherlands can attest.

The report says this top Dutch national daily is trying to win back via lower pricing lost real estate classifieds business that drifted to the country’s leading online real estate classified sites, but it hasn’t worked. “Special prices do not help. It is the number of visitors that count,” Quintin Schevernets, online classified manager, told the survey.

Property is a sector where newspapers have done well also in print and online over the past year, no doubt because of the global property boom, but then, so have their online competitors. If such a powerhouse newspaper as de Telegraaf can falter it is just an indication of just how much competition there is out there in the online world.

And what comes as no surprise to any newspaper classified manager is that the auto business is an absolute disaster. The report says newspapers saw their share of auto advertising spend drop 12% last year.

The Danish daily Politiken told the report it learned the hard way that you have to really work hard with car dealers since the dealers are not willing themselves to invest in technology to any great degree. Research Director Poul Melbye told the report that Politiken did not think to integrate the inventories of the country’s largest car dealers with its own advertising system. “We can see now that the winners are the companies that have a technical relationship with the dealers,” he said.

And as for the private sector, the economic ads have virtually disappeared in print in some countries, which is one reason the UK regional newspapers are having such a hard time of it these days. Saving the sector are the non-economic births, wedding, death announcements and the like.

Most frustrating to newspapers is that their own web sites are increasing their unique visitors all the time but that doesn’t necessarily translate into higher revenues. Survey after survey shows that online readers prefer newspaper sites for their local news reading, but with so much classified competition out there from the non-news sites at lower pricing newspapers are strapped in raising their online classified rates.

So given all of this what are the three keys to a successful online classified strategy: According to the report it is innovation, innovation, innovation.

One great example cited in the report is the Brazilian daily Zero Hora. Having basically lost its private party economic ads to the like of E-Bay the basic thinking became, “If you can’t fight them, join them”. So the newspaper not only offers ads online but it has added a transaction platform, too.

“It’s a new mindset, a new culture that demanded commitment and determination, according to marketing Manager Renato Mesquita. “Our portal is the most advanced product in its category in our market,” he said. And, incidentally, in spite of a hefty investment it is already profitable.

And digital platforms have actually been a boon to some newspapers – those that never were in the classified business in the first place – yes, there actually are some newspapers for which print classifieds are not a business!

For them online classifieds offer a whole new business opportunity. Richard Peirano, director of Uruguay’s leading El Observador explains: “As we have no print classifieds we have not suffered any negative impact. This is not a threat but a great opportunity, because the Internet lowers the costs of entering a fast growing market.”

Another factor hurting classified sales is “Keeping Up With the Jones’” In other words competing on a technological basis with those online sites that solely concentrate on classified. The report cites that newspapers are not keeping up with the spend necessary in providing the technological advancements (search and the like) that can be offered elsewhere.

ftm wrote recently again about LiveDeal that actually runs newspaper classified sites and maintain those sites to the highest technological level in exchange for revenue share. Sounds like there is a need.