By Lisa Baertlein
SAN FRANCISCO (Reuters) - Not so long ago, the classified ad section
of the local newspaper was the best place to sell a car, rent an
apartment or post a job opening. Now the Internet is shaking up this
once-staid and lucrative business.
Newspaper publishers that once enjoyed a virtual monopoly
on the classified market are facing increasing competition,
including from Web sites like eBay Inc.
Experts wonder if free online ads and innovations that allow sellers
of everything from exotic cars to Pez candy dispensers to reach a
massive audience via the Web will expand the business for all or
inflict serious damage on incumbents.
EBay, best known for its auction site, has spent more than $850
million to buy three online classified companies in the United States
and abroad. Last summer, the Web marketplace took a 25 percent stake
in mostly free, San Francisco-based Craigslist.org
(http://www.craigslist.org), an online classified shop that covers
about 100 cities worldwide.
EBay recently launched free classified Web sites in seven
international markets including Germany, China and Japan. Those new
Kijiji-branded sites (http://kijiji.com) mimic Craigslist.
Moves like these are causing havoc with newspapers, many of which have
fought back with online versions of their publications -- complete
"It's a free-for-all," said Peter Zollman, founding principal of
consulting firm Classified Intelligence. "I think the threat (to
newspapers) is very real because classified advertising is so
The Newspaper Association of America expects the market for print
newspaper classified advertising to grow 5.2 percent to $17.4 billion
But newspaper market share is falling amid intense competition from a
range of players, including Web sites and Internet search companies,
as well as radio and television, niche publications and Yellow Pages
providers, Zollman said.
Newspapers remain the dominant medium for listing jobs and selling
cars and homes in most local markets, but Zollman warned they must
work to keep that hold.
"I don't think they'll go out of business, but the business is being
transformed very fast," he said.
Analysts who focus on the Web also point to the success of companies
like Yahoo Inc. and MSN Web unit, which have seen their banner and
branded ad revenue grow as big advertisers follow audiences from
television to the Internet.
ROOM FOR ALL?
Still, some analysts see the changing classified ad market resulting
in a larger sea that can float all boats.
"It's a case of one and one equaling 2 1/2," said Ed Atorino, a
publishing analyst at Fulcrum Global Partners. "It doesn't seem to be
taking away a lot of dollars from the traditional media; it just seems
to be a new market."
Print newspaper classified revenue declined from 2001 to 2003, when
the broader ad market was soft, but has risen in every other year
since the Web went mainstream in 1995.
The Kelsey Group estimates that total revenue from U.S. Web
classifieds was $1.95 billion in 2004, excluding eBay, but
including sites operated by newspapers.
Auto sales typically constitute the biggest chunk of classified ad
spending at newspapers, followed by help-wanted and real-estate
listings, while Web classifieds are dominated by jobs, followed by
dating and autos.
The help-wanted market may be a harbinger for the future push and pull
between the online and offline worlds.
Newspaper job listings were the first to feel the heat from
Internet rivals like Monster.com.
Most newspaper chains during 2004 continued to lose online recruitment
market share to rivals, based on the number of job postings, according
to Corzen, a New York market research firm. Help-wanted revenue
growth at newspapers also lags that of online job posting sites.
But there were some bright spots. Online recruiting site Careerbuilder
jointly owned by newspaper publishers Gannett Co. Inc., Knight Ridder
Inc. and Tribune Co. gained market share, as did Hollinger
International and Pulitzer Inc.
Newspapers are also fighting back on other fronts. For example, Hearst
Corp.'s San Francisco Chronicle is giving extended listings to
unsuccessful sellers, while Miami Herald and San Jose Mercury News
publisher Knight Ridder lets people buy online-only ads, with or
without pictures. Still others allow their news items to be used
freely in exchange for advertising revenue earned through online sources.
Reuters Limited is one such example.
Kelsey analyst Greg Sterling said the jury is still out, but
newspapers appear to be worse off than before the arrival of online
"It's very hard to know what kind of dollars have been lost from
newspapers," he said. "I think it's substantial."
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