More than a third of online newspapers made money last year, a surprising figure that reflects the moneymaking potential of Web-based advertising.
The survey by the Newspaper Association of America also said another 24 percent of the online newspapers run by traditional media companies expect to be profitable within four years. The NAA cautioned, however, that the results are preliminary.
"Many newspapers are generating revenue from a combination of sources, including display advertising, classifieds, Internet access, Web hosting, subscriptions, and premium-priced products," said Randy Bennett, NAA vice president of new media.
Of those surveyed, 75 percent contain classified ads, with 52 percent having standard size ad banners.
Competition in newspapers' markets is growing, though. Today, Yahoo stepped up its efforts to lasso online classified dollars, giving online papers another competitor in one of their most profitable sectors.
Yahoo went nationwide today, with hundreds of thousands of searchable listings in areas including employment, real estate, personals, and miscellaneous merchandise.
So far, newspapers have done well in protecting their local classified market as they ventured on to the Net. But players like Yahoo and Pacific Bell's AtHand are trying to lure Net surfers away from local listings to their broader offerings.
"We've seen them moving aggressively to develop classified products to maintain that franchise," Bennett said.
"Increasingly over the last ten years, print newspapers have become increasingly dependent on classified ads," added Jim Conaghan, NAA's director of market and business analysis.
Newspapers have a good shot at hanging on to their share of this market on the Net, market analysts say. For example, unlike strictly online operations, newspapers can offer their print customers a chance to put their ad on the Net and vice versa, an added value customers want. Also, surfers who go to local sites for news often browse the classifieds there before turning to the entire Net.
"Many newspapers are giving people who don't have time to call in an ad the opportunity to place those ads online and renew them as well," said Allen Weiner, Internet analyst for Dataquest.
"I still think that people look to their local newspapers for the primary use of classifieds. However, newspapers shouldn't abandon the traditional classifieds because you can't take your computer with you in the car when you're commuting, for example."
However, newspapers aren't completely safe from national competition. Employment is the most popular category for online classifieds, Weiner said. There are numerous Web sites with searchable, national job listings like the Monster Board and CareerMosaic.