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Newspapers and ads: Missed delivery

The Web has conquered the market for classifieds. Is there any cause for hope in last-ditch efforts by the old-school print publishers?

When I was buying my car a few years ago, the first place I turned for information was Kelley Blue Book online.

When I moved a few months ago, I located free boxes on Craigslist. And if I were looking for a job, I would search on Monster.com.

It never occurred to me to look in the local newspaper classified advertisements. And if I were looking to buy a house, I'd go straight to real estate Web sites that have photos, maps and all sorts of details you'd never get in a newspaper ad.

If I'm any indication of the average person (and I like to think I am), no one should be surprised that newspapers are struggling and that newspaper alliances springing up to tackle online ads have that whiff of desperation.

As much as I like my local newspaper, I worry it has already lost the battle for online classified ads. I also have to wonder: why didn't its management see this coming somewhere in the late-1990s, like so many other people did? Actually, a bunch of newspapers did try back then, but that project failed. Hard to imagine why the new ones will succeed.

"I think that ship has sailed," said Michael Cassidy, chief executive and president of online ad network Undertone Networks. "Those dollars are gone. The classifieds game is over for them today."

Members of a newspaper consortium started last year by Yahoo are talking to Gannett and the Tribune Co., which have a separate such effort in the works. That would seem to undermine the Yahoo effort, possibly indicating its members aren't all that happy with the pace or scope of the Yahoo effort.

Ad spending on the Internet is rising steadily while newspaper ad spending is declining. Research firm eMarketer projects that U.S. online ad spending will grow 26.8 percent this year, while newspaper ad spending is projected to drop 4.6 percent this year, according to a Jack Myers Media Business Report.

"The culture in the newspapers is the real culprit. There is inertia. I don't necessarily think it's too late for them, but the challenge always with newspapers is execution."
--Greg Sterling, Sterling Market Intelligence

Online revenue growth at newspaper sites was below 30 percent in 2006 and is expected to fall to 22 percent this year. For the first time, newspapers aren't maintaining share in total Internet ad growth, according to the The State of the News Media 2007 annual report. According to the report, written by the Project for Excellence in Journalism and Rick Edmonds of The Poynter Institute, "Newspapers have a tough time making the case that their business is headed in the right direction."

"You could argue that they are a little late to the party," said Edmonds, media business analyst at The Poynter Institute. "This year's (newspaper advertising) results have been even worse than the year before."

The fact is that people use the Web differently from the way they used traditional media. I still read The San Francisco Chronicle online, but mostly for local news and features. For this reason, display advertising is relatively strong on newspaper sites, Edmonds said.

But when I want to buy something, I go elsewhere--Zillow for real estate information; Amazon.com for books; Autobytel.com for auto prices; and Craigslist for just about anything else.

Newspaper execs realize this is happening.

Changing mindset

"In many newspaper markets, we have to change the way that we've been accustomed to thinking. Which is: 'there is only one newspaper in town,'" said Charlie Diederich, director of marketing and advertising for the Newspaper Association of America. "We might be seen as competing against a real estate Web site that has the MLS (Multiple Listing Service) data on it. It's a big change in the way we approach our world."

Some newspaper companies have been investing in the vertical sites. For instance, Gannett and other newspaper companies own stakes in classifieds Web sites like CareerBuilder.com, Cars.com and Apartments.com.

"We saw some of the changes that were happening in the industry quite a while ago," said Tara Connell, vice president of corporate communications at Gannett. "We've been responding to--I wouldn't call it competition, so much as a shift in the use of media by people. We've said consistently that we recognize people are shifting their habits and going to multiple platforms, and it's our vision and mission to get there."

Yahoo's consortium with Hearst, MediaNews, Cox and other newspaper companies was formed to sell job listings through Yahoo's classified job site, HotJobs. The deal has since been expanded to more than 20 publisher partners representing about 400 daily newspapers. Local salespeople at the member newspapers can sell local ad inventory on Yahoo, and Yahoo national salespeople can sell national sales onto local newspaper sites. Yahoo is also integrating some local newspaper content on its sites. On Friday, Yahoo announced the newest newspaper partner, the New York Daily News.

Separately, Gannett and Tribune, which are not members of Yahoo's consortium, are talking to other publishers, some of whom are in Yahoo's group, about forming another online advertising network. The Chicago Tribune first reported the effort on Tuesday.

Why the need for a second organization? Connell of Gannett confirmed that talks were going on but declined to comment beyond that. A Tribune representative did not return a call seeking comment.

Executives from Cox and MediaNews said talks with Gannett and Tribune were very preliminary and that the two efforts would not necessarily compete or overlap.

"The discussions are directed to putting together a national buy for newspapers online. (Whereas) the products we're dealing with on Yahoo are specialized," Dean Singleton, chairman and chief executive of MediaNews, told CNET News.com. "They wouldn't conflict."

"We would be able to sell (on) all the newspaper sites participating, across the entire country," said Leon Levitt, vice president of Cox Digital Media. "Newspapers are the No. 1 local site in virtually every market in the U.S., according to ComScore. The opportunity to sell ads on that is powerful."

But banding together may not fix things when you have companies that are traditionally slow-moving and risk-averse. And this isn't the first go-around at this for the newspaper industry.

Cox, Gannett, Hearst, Knight Ridder, The Times Mirror, Tribune, The Washington Post and Advance Publications formed a joint venture with the grandiose name of "New Century Network" in 1995 to support local newspapers in their online services, share content and establish an ad network across their sites. The venture was shuttered in 1998 because of lack of significant return on investment and an inability for members to agree on a common business plan, InternetNews.com reported at the time.

"It was a good idea 12 years ago. To do it today is not such a good idea when there are so many ad networks that have built up relationships with ad agencies," said Cassidy of Undertone Networks. "The biggest challenge (for newspapers) is going to be how to work amongst themselves."

"The culture in the newspapers is the real culprit. There is inertia," said Greg Sterling, principal of Sterling Market Intelligence. "I don't necessarily think it's too late for them, but the challenge always with newspapers is execution."