Welcome to “Media Malaise”

And new research indicates that craigslist.com’s business (online classified ads) is booming, costing newspapers in the millions of dollars annually in lost revenues and forcing some media companies to compete by offering some free classified advertising on their web sites.

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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.

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.

Did You Notice That All Those Big Newspaper Deals This Year to Buy Internet Sites Were for Cash, Not Shares?
Could the average 15% drop In newspaper 2005 share prices have something to do with that?

Who Do You Think Is Raking In the Money?
Google Is now worth some $US60 billion, Yahoo around $US50 billion. Compare with Dow Jones at about $US3 billion or Tribune, with all their big city newspapers and TV stations, at around $US15 billion.

Now It’s Confirmed: Some of That Double Digit Internet Advertising Increase Forecast For Each of the Next Five Years Will Come Directly From the Pockets of Newspapers
While mainstream newspapers are bemoaning circulation declines, and trying to get the young more interested, they were at least secure knowing that while the industry’s $47 billion spend hasn’t grown much over the years it is still 40 times more than Internet advertising.

A new report from Merrill Lynch said that US newspaper advertising gains (display and classified) are continuing their downward spiral. In April newspapers registered a 3% increase, in May it dropped to 2.5%, and in June it averaged around 2%. On the Internet the advertising gains are in the 20-40% range.

The problem, according to Merrill, is that real estate advertising and retail advertising don’t look so hot for the rest of 2005, and newspapers are pinning their hopes on an increase in movie advertising (more movies expected than in the first half of the year) and also that tech advertising might pick up. At best newspaper advertising may improve by 3.5%.

But according to new research by Hitwise, visits to the various city domains of craigslist increased by 62% in the 12 months ending July 23, 2005, with market share increasing 73% in the year ending at the end of June.

And craigslist is not just a US phenomenon. It is active is 35 countries, it has a separate site for each of 175 cities, and in total, it draws more than 10 million unique visitors each month who call up more than 2.5 billion pages that feature some 5 million ads per month. And more than 99% of all the advertising is free.

In San Francisco, where craigslist actually began and is one of three cities where it charges for some job listings (the others are Los Angeles and New York), a study last December indicated that San Francisco Bay Area newspapers were losing some $50-$65 million revenue annually in their employment ad business to craigslist. Other craiglslist sites are not quite as successful -- its Geneva, Switzerland domain, for instance, has just two job postings.

Bill Tancer, Hitwise vice president of research, asked the lingering question that no one really has answered except to also give away some ads, “ How will established purveyors of classified listings, particularly local newspapers, adapt and compete?” When a researcher poses that type of question without giving the answer then you know the victims (newspapers) are in serious trouble.

The Conference Board, a non-profit very well respected US research organization, says that in June there were 2 million first-time online job postings appearing on major Internet job boards. It doesn’t say how many of those ads may also have appeared in print, but the likelihood is that the very large majority of those online ads represent lost print classified revenue.

In the US, newspapers can earn up to 50% of their advertising revenue from classifieds. It is revenue they very much have to protect. Knight-Ridder, for instance, has dropped fees for merchandise ads in 22 of its 27 markets, while still maintaining fees for real estate, recruitment and automotive ads. Craigslist’s two leading categories are job postings and real estate.

The Tribune Company that owns the Los Angeles Times has expanded its Recycler.com free classified site from just Los Angeles to include 12 US cities. Its basic model is that if it can attract people to free merchandise ads maybe they’ll graduate to paying for other ads.

So it seems the general idea is to gently test the toes in the water with free but try not to give too much away.

A better marketing thought might be, “If you can’t beat them, then do the same yourself!” As newspapers continue building their multiple platform web sites, classified ads should become a major player. There are various marketing ploys that can be used – for instance, pay for an ad in print and get it for free online; or vice versa – it’s time for the “all in” ad that pays for online and print. And for those who think they can keep charging separately high fees for each to protect the short-term bottom line they had better start thinking long-term, and quickly.

Develop good reasons why readers would visit your online classifieds instead of someone else’s and for that matter make the print classifieds a better read (hold contests with clues, results in the classified section; intersperse some reader generated text and or pictures etc.) Also institute cross promotion not only between print and online but also within the most popular pages of the online site to promote its online classified section.

What craigslist has going for it now is that is free and it is heavily visited. Free online within the cost of paid print may not capture all of that craigslist audience, but it’s a start.

And as craigslist expands from city to city, if publishers don’t try and nip it in the bud in their city then they will feel the financial consequences of not doing so for a very long time to come.

Media malaise is here to stay for the foreseeable future. Just how bad that sickness hits individual newspapers is in direct proportion to the lack of proactive medicine individual publishers prescribe.

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!

Craig Newmark of craigslist fame