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The latest annual report from the Project for Excellence in Journalism, “The State of the News Media 2008,” is out, and it paints a dire picture of the newspaper industry. Much of the reason things are so dire, of course, is because newspaper classifieds are in significant decline.
To save you from plowing through the massive report, we’ve pulled out and summarized the parts that are relevant to the classifieds sector.
Overall ad revenues. While flat in 2006, industry-wide advertising revenues fell 7% in 2007. Retail and national advertising were off only a little, according to the report, “but all categories of the once-lucrative classifieds are losing share — a gradual decline that looks to be irreversible.”
Bleak future for print. “Were print advertising losses to accelerate, it might even make sense three to five years hence to look at pulling the plug on print and rolling the dice on getting readers and advertisers to follow to a Web-only format.”
Changing consumer behavior. “It has become clear that the typical online shopper is on a narrowly targeted buying mission and thus just as happy to search commerce-only sites (which some papers are experimenting with now in their home communities). …
“It has become clear that a very large share of those looking for content or advertising on Web sites come through the side door of search rather than the front door of the home page. That is causing newspapers to think like their competitors, seeing whether they can capture a share of the commerce-only visitor who is looking for a specific product or service and may be indifferent to the news surrounding it.” (The take-away from that should be: How can we slice and dice our classifieds and incorporate them into pages, where they can become useful for searchers exhibiting the behavior described here?)
Classifieds meltdown. According to the report’s section on advertising and industry economics, “The worst damage has been to classifieds, which once accounted for 40% of advertising revenue and was a particularly profitable segment. If it were not for the declines in classified, indeed, newspapers would face only moderately difficult revenue problems….
“Newspapers have lost market share to electronic classified rivals, which exist in every major category. These online competitors, often by definition are made to be searched and thus are a perfect match to Web-based commerce.”
Employment/recruitment decline. 2007 marked (another) year of decline, almost 20% in the third quarter, according to the report. “In employment/recruitment, the biggest losses came early in the decade with the rise of Monster.com. Newspapers have regrouped to a degree, partnering with industry-owned CareerBuilder and this year with Yahoo HotJobs and even Monster itself. This amounts to sharing a business the industry once had to itself, and 2007 marked another year of decline, almost 20% in the third quarter, the most recently reported.”
Automotive taking a skid, too. “Automotive is another problem child, unlikely to get better soon. The weakness in the U.S. car industry hurts; there are fewer local dealerships, and these get smaller advertising allowances from parent companies. Marketing studies show that buyers now also make heavy use of company Web sites, most of which now offer a version of ‘design your own car.’ The forecast is for continuing shift to new media marketing.”
Real estate’s downturn. “As recently as 2006, real estate classified was in positive territory, up 20% for the industry. But with the housing bust of 2007 came an advertising collapse, too. Revenue was down as much as 40% in former boom markets like California and Florida; newspapers in those states had the worst year-to-year total advertising revenue declines.”
Craig’s legacy. “Craigslist, free for everything but some employment listings, has hurt in several of these categories. It has gobbled share in general classified and is a presence in real estate, cars and employment as well.”
No end in sight? “As the situation for classified worsens, gutting what was once the most important financial leg of the industry, managers now frankly admit they do not know where the bottom is.”
Classifieds’ woes spill over. “Fewer print classifieds translate to fewer opportunities to sell a related online ad. If some categories of classified — like real estate — pick back up, so may some of the related online business. However, with classified still accounting for 60% to 70% of ad revenues at many sites, the industry’s wagon is currently hitched to a fast-falling star.”
Discouraging words. “Online classifieds, with their close connection to print classifieds, are no basis at all for growth. …
“Classifieds are clearly going to fall some more in 2008. Industry executives can hope classifieds level off to a smaller but stable base, but that’s no sure thing. Conceivably, the rate and volume of losses could even accelerate.” (Take-away from that: Reinventing newspaper classifieds is an absolute necessity.)
Video may make up for classifieds’ fall. The report cites newspaper industry researcher Gordon Borrell as predicting that local video advertising will “rise from a tiny base now to a hot format over the next five years.” Further, Borrell predicts that “classified and local display will not only stagnate but decline. A typical video ad might be for a local car dealership, partly promoting service, good deals and the like, and part a demonstration drive of the latest models.”
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