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No revenues? No news …

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The New York Times printed two compelling numbers Tuesday that ought to have newspaper beancounters quivering in fear:

14,626,000 — the number of unique visitors to classified advertising web sites in September 2004

26,349,000 — the number of unique visitors to classified advertising web sites in September 2005

That’s an 80 percent increase in the use of online classified ad services. Craigslist.org use increased 165 percent, according to The Times. Classified advertising — small text ads that seek or offer goods or services — is important to newspaper companies because it provides a significant source of revenue, as does display advertising. The two numbers proferred by The Times suggest that the number of people looking to buy or sell goods or services online is increasing at a dramatic rate.

That can’t be good for the newspaper industry. Without adequate and stable revenues, the industry’s ability to fulfill its public-service obligation under its grant of First Amendment protection would be compromised.

Newspaper company investors are unhappy, too. As circulation declines and revenues stagnate, share prices for media companies are dropping. Some investors want to break up media corporations, arguing that they’re worth more in pieces than as a whole. That can’t be good for newspapers, either. Under such pressure, Knight Ridder, the nation’s second-largest publisher of newspapers, put itself up for sale in mid-November.

In the face of such financial stress, it’s clear that newspapers need a new business model. Where will it come from?

Certainly not from the Newspaper Association of America. In a press release last week, its president and CEO, John F. Sturm, said:

The positive trend in retail and classified shows advertisers’ continued confidence in newspapers as an effective medium for reaching home buyers, job seekers and other prospective customers through core newspapers and a growing variety of a brand extensions. [emphasis added]

The press release said that “[a]dvertising expenditures for newspapers and their Web sites totaled $12 billion for the third quarter of 2005, a 2.4 percent year-over-year increase.”

That’s $12 billion, up only 2.4 percent. And it apparently includes Web site revenue.

Google doubled, thanks to its keyword search system, its advertising revenue in that quarter to $1.58 billion.

At the moment, newspapers haul in more advertising dollars. But the rate of increase of usage of online advertising — particularly classified advertising — is prodigious. Craigslist usage nearly tripled to almost nine million unique users. And it’s free to users. That has to be draining newspaper classified revenues.

Joining the race to profit from the ability to search for information are Google Base, Froogle and Google Local. And let’s not forget eBay classifieds.

The bread-and-butter classifieds for newspapers used to be cars, real estate and help-wanted ads. Not so anymore.

Cars.com and Vehix.com, for example, are essentially searchable online databases of vehicles. Add in local real estate online classifieds — I searched for the house I bought online, not through my local newspaper. Need a job? Go to Monster.com.

The means with which newspapers operate — revenue — is contracting. Yet I hear little from newspaper professional organizations and think tanks discussing what new revenue models would work. Of course, that discussion must involve by what means the news will be delivered to the reader.

Casual readers of newspaper ought to pay attention. If you want your local newspaper to explain why your property taxes are rising, report on the local high school’s football team or show how, over time, your community is changing and why, then you ought to be interested.

Shrinking revenues = shrinking resources for hard-hitting news stories = limitations on the people’s right to know.

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Written by Dr. Denny Wilkins

November 29, 2005 at 1:50 pm

Posted in Uncategorized

One Response

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  1. Scratching My Head, Wondering…
    While classified ad revenues are on the rise, I wonder what display ad revenue is doing. I can only speak anecdotally, but I know several small businesses and not-for-profits who have begun to advertise in the classifieds INSTEAD of buying display ads.
    And, looking at the emphasis you added to the quote from the NAA, I can’t help but wonder if the classified ad bubble is about to burst. The formerly red-hot housing market has cooled significantly in the past couple of months. If home buyers/sellers make up a substantial part of the classified ad market, what happens as fewer people are buying and selling?
    I’m also wondering about Google. While Google’s ad revenue doubled, I am curious about the effectiveness of that advertising. Every article I’ve ever read about on-line advertising says consumers find on-line ads an annoyance, at best, and evil personified, at worst. Advertisers are shelling out their bucks, but is it doing them any good? I wonder if 1) pollsters are just completely wrong about on-line ads, or 2) there’s going to be a crash a-comin’ there, too.

    cwmackowski

    November 30, 2005 at 3:10 am


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