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Newspapers: Help wanted in Net ad battle

Multimillion-dollar portal deals this week show that traditional media won't give up the jobs-listings market without a fight.

Traditional newspapers are taking the gloves off in a high-stakes brawl with Web-based competitors over the control of help-wanted classified advertising.

The fight escalated this week, when announced exclusive deals with America Online and MSN that will lock rival out of two of the most highly trafficked sites on the Web.

Whether CareerBuilder's deals will bear fruit remains to be seen. But the message sent by the joint venture of newspaper conglomerates Gannett, Tribune Company and Knight Ridder was clear: The newspaper industry will go to extraordinary lengths to prevent Web rivals and Yahoo's from chipping away at its coveted help-wanted business.

"It's absolutely a defensive move," said James Janesky, an equity analyst at Janney Montgomery Scott. "It's also recognition that online is a wave of the future that's not going to end."

This week's deals come amid a sharp decline in newspapers' overall classified-recruitment ad revenue, which dropped by half, from $8.7 billion in 2000 to $4.3 billion in 2002, according to the Newspaper Association of America (NAA).

Newspapers have long sought to hedge their bets by embracing online advertising initiatives such as CareerBuilder. But now they are tossing more resources into the fray.

That's because, despite the significant drop-off in overall classified-recruitment spending, newspapers have seen success in online recruitment. Some papers are reporting as much as double-digit growth from the previous year, according to the NAA. But the effect of the Internet on recruitment dollars to newspapers will not be known until after the job market has bounced back.

"The Internet has had some impact, but we don't know how deep the impact is at this point," said Randy Bennett, vice president of readership integration at the NAA. "Clearly, the economy is the biggest driving factor that has kept recruiting dollars down."

The newspaper industry is not waiting around. Instead, it's waging a $265 million blitz in an effort to safeguard its lifeblood.

"I think that's what they're most obviously embracing--that the Internet can perhaps serve parts of the employment market better than traditional newspapers," said Frank Gristina, an analyst at Avondale Partners.

CareerBuilder's deal with AOL will last four years for up to $115 million; the MSN deal will last five years with payments of up to $150 million.

As a result, each deal averages about $30 million a year, assuming the Internet companies deliver on their traffic and performance expectations. That's about 20 percent more than the $25 million a year Monster is paying AOL for exclusivity--a deal struck in 1999 during the height of the dot-com boom that will expire at the end of the year.

Matt Ferguson, COO of CareerBuilder, said the payments were not guaranteed and only payable if AOL and MSN could live up to their promises of delivering more new customers to his company.

"The objective is to take us from second or third place in traffic to number one," Ferguson said. "Monster's going to lose about 40 percent of their traffic, and we're going to gain that."

On Monday, shortly after CareerBuilder announced its deal with AOL, Monster issued a damage-control statement that said it planned to reallocate the money spent on portal deals to "targeted national and local-marketing initiatives." In all, Monster plans to spend $50 million a year in an attempt to lure more job seekers in local markets.

"The world has changed a great deal since 1999," Monster's founder, Jeff Taylor, said in a statement. "While working with AOL and MSN played an integral role in establishing Monster as the online recruitment leader, we are now focused on implementing multiple marketing strategies on the national and local levels to attract a more highly targeted audience."

A Monster market
Only a job-market rebound will determine whether CareerBuilder's pricey effort to thwart Monster will pay off. The online help-wanted business remains in a state of too much demand and not enough supply.

Often, jobs advertised on these sites net thousands of resumes and queries, causing a glut of inventory without enough buyers. Sites such as Monster offer premium services for job seekers, charging them fees for additional services.

CareerBuilder's Ferguson said the company made $34 million in revenue in the first quarter and $37 million in second quarter.

Monster's earnings report last week showed that its online recruitment business was flat. Revenue in the second quarter of 2003 came in at $103.1 million compared with $104.7 million during the same period in 2002.

Yahoo did not reveal HotJobs' performance last quarter, but executives said the site showed double-digit revenue growth from last year, while its listings revenue, derived from HotJobs and its "search and marketplace" services, increased 29 percent from the previous year.