Now There Is A Way For Newspapers to Compete With Craigslist. Say Hello to LiveDeal

Torstar, publisher of the Toronto Star, Canada’s largest circulation newspaper, is eliminating its current online classifieds operation for a new LiveDeal-powered site available by the end of the year, and it likes the whole idea so much that this week it invested $3 million for a minority stake in the Silicon Valley company

ftm background

As the Price of Newsprint Increases the Size of a Newspaper’s Page Narrows Or Its Paper Thickness is Reduced; The Next Step Is To Take The Paper Out of Newspaper
Seldom does a day pass that some major newspaper like The New York Times or The Wall Street Journal doesn’t announce that it is narrowing the width of its pages, or reducing its paper weight thickness, to save on newsprint costs. It’s a similar scenario to 10 years ago when newsprint reached its price peak.

The Bad News for Newspapers Keeps Getting Worse: “Newspaper Revenue Shifts to the Internet” Cries Out One Headline, “Bank Warns Newspapers of Rough 2006” Screams Another
Just what a newspaper publisher doesn’t want to hear: “The consistent growth in overall Internet advertising shows marketers may be shifting more of their total advertising budgets online,”, according to David Silverman, a partner with PriceWaterhouseCoopers.

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.

LiveDeal has a simple idea – offer an online classified ad site searchable by postal codes. Punch in any of the 70,000 US zip codes and classifieds for a large variety of topics show up from a 50-mile radius. The search can be extended outwards to the whole country.

As part of the Torstar deal, LiveDeal will create a Canadian LiveDeal web site. Once it is active the Star will transfer its online classifieds to the new site and close down its current online classified operation.

What makes such an operation interesting to newspapers is that unlike Craigslist, LiveDeal is actively encouraging newspapers to partner with it on a revenue share basis. LiveDeal becomes the newspaper’s online classified presence, responsible for the site’s various features and maintenance, while the newspaper concentrates on getting the ad in the first place.

It’s a simple idea – a reader of the Toronto Star, for instance -- calls the newspaper’s classified department wanting to sell a car. Besides appearing in the print edition that ad will also appear at no charge on the LiveDeal powered Toronto Star classified ad site. That means the ad not just in local print, but via the online site it can be accessed, locally, nationally or even internationally.

While the online ad is free, the newspaper’s classified ad staff will try and sell enhanced features for the ad’s online placement. For instance, for a few dollars more show the car’s picture; or how about placement at the top of the car sale category, etc.

The newspaper is already drawing up new pricing plans that combine the print ad and enhanced features for the online placement.

“There has to be a free point of entry on the web,” said Tomer Strolight, president of Torstar Digital, “but that doesn’t stop us from selling enhanced features.”

Things could get really interesting if more than one newspaper participates within a 50-mile radius. Rather than not wanting a competitor’s classifieds the thinking goes that the more the merrier since it makes the overall site that much stronger. Asked if the Star would welcome a competitor newspaper from within 50 miles to participate on the same site Strolight said, “I certainly would like to talk with them”. Obviously, the more inventory in a local area the more people will flock to the site.

The Star already enjoys great success in sharing its recruitment ads online with two competitors – the Globe & Mail and Gesca. The three parties jointly own workoplis.com, started five years ago, that today lists about 50,000 jobs, and thus recruitment ads remain outside the LiveDeal relationship. .

Strolight described workopolis as “a runaway success. When we started the site the ads went on for free, but now we sell the ads online because it is so successful.”

LiveDeal’s founder and CEO, Rajesh Navar, says that revenue sharing deals with newspapers is a natural business plan, basically a win-win for the newspaper and for LiveDeal. “We provide the newspaper’s classified online site, maintain it, and enhance it while the newspaper’s classified sales staff are actively cross selling enhanced features to go with the ad’s free placement online.”

Navar founded LiveDeal.com in 2003. He was an original member of the engineering and management team at eBay and that probably explains why the site has an eBay look and feel about it.

By promoting “local” sales – within the 50 miles radius, LiveDeal believes it has an upper hand for selling those “try it before you buy it” items. Buying across country poses risk, but one can make a 50-mile trip to try something out. Its financial performance would tend to prove the point – it currently lists more than $3 billion worth of goods for sale compared to $1 million one year ago

If Craigslist did not already worry newspapers, then Google gave them something even more to think about this week. A home page for Base.Google.com appeared for a short while and it had the look, feel, and smell of an online classified site, although Google did not confirm that. Since everything Google does is for free, all newspaper publishers need now is to compete not only against Craigslist, but also Google, the world’s most successful online sales company. About 40% of a newspaper’s revenues come from its classified business.

One advantage LiveDeal can give a newspaper is that because it manages the newspaper’s online site, and it has the resources and technology to maintain

the site to be as modern as possible including using rich media, that a newspaper doesn’t have to worry any more about investing to make its classified site competitive with others. A University of Missouri-Columbia study, for instance, recently criticized newspaper classified sites for not embracing multimedia.

That lack of multimedia may be because of a lack of bandwidth or similar technical reasons or it could just be a plain lack of resources for the additional technology. But that worry goes away when a third party has responsibility for managing the site and keeping it up to date with the latest rich media features. LiveDeal says it is adding maps and voice over IP within the year.

A newspaper could argue it can handle classifieds on its own web site quite nicely without need of a third party. But for all the human and financial investment it takes to continually keep sites technically up-to-date, let alone the design and filing, it could well behoove a newspaper to check out the financials of doing such a third-party deal.

LiveDeal Classifieds Show Major Growth - May 2, 2006

LiveDeal is moving from strength to strength. A year ago it announced it had topped $1 billion in the value of merchandise on its site. Today, that figure is now $5 billion. And the number of visitors that have visited the site has grown by 163% in the past 12 months.

LiveDeal says it has agreements with about 10 US newspapers and is in active discussions with some large newspapers that should push revenues from that that side of the business up considerably.

The site it set up with the Toronto Star in January is said to be doing well – March unique visitors were up 30% over February -- and the company says it is in talks with other newspapers outside the US.

LiveDeal Launches Canadian Site - January 18, 2006

LiveDeal has teamed with the Torstar Corp., to launch its Canadian classified ad site less than three months after Torstar invested in LiveDeal.

“LiveDeal’s platform is ideal for media partners worldwide,” according to Steve Harmon, LiveDeal’s VP for corporate development, and he said the company is actively seeking international media partners.

Since its US November, 2004 launch, LiveDeal listings have increased by 300%, featuiring more than 400,000 items daily worth more than $3 billion.