ANALYSTS: NEWSPAPERS COULD LOSE $4 BILLION TO INTERNETWeb...

ANALYSTS: NEWSPAPERS COULD LOSE $4 BILLION TO INTERNET

Web Continues to Siphon Away Classified Ad Revenue
April 20, 2005
By Jon Fine
SAN FRANCISCO (AdAge.com) -- Newspapers' long-secure classified ads business has already eroded noticeably and could ultimately cost newspapers about 9% of its total ad revenues by 2007, two executives from consulting giant McKinsey & Co. told attendees of the Newspaper Association of America's annual conference yesterday.
The newspaper industry's traditional lock on classified ads as its key revenue source is being seriously eroded by non-newspaper online classified ad sites.

Luis Ubinas and Jochen Heck warned that newspapers could lose $4 billion of "highly profitable" classified revenue by 2007 -- or around 20% of newspapers' 2004 classifieds revenue and just under 9% of the $46.6 billion in total newspaper ad revenue last year -- if trends that afflict help-wanted classifieds spread to automotive and real-estate classifieds.

Better than printing money
It's hard to overstate the importance of classifieds to newspapers' bottom lines. Those pages of pure agate type are so profitable that, according to Mr. Ubinas, one newspaper executive said classified ads were a "better business than printing dollar bills."

But the proliferation of online sites as diverse as monster.com, realestate.com and craigslist.com has substantially complicated newspapers' hold on the format. "Once upon a time, classifieds was the exclusive property of newspapers," said Mort Goldstrom, the NAA's vcie president of advertising. "That time is over."

The chilling part, Mr. Ubinas said, is that the key problem is not the competitors but rather what their pricing is doing to the entire classifieds model, calling it "price destruction."

Another chilling fact: "Online is capturing all the growth," he said. >

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LC