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Interesting stuff. Where do the figures come from?

July 8, 2009 at 12:21 PM Robert G. Picard said...

The data come from the Newspaper Association of America and the Internet Advertising Bureau.

July 8, 2009 at 12:35 PM James Geluso said...

I think this analysis misses a key point by focusing on expenditures. According to newspapers, one key place they're losing classified revenue is Craigslist, and every time someone places an ad there instead of a newspaper, they're not paying for it (with a few exceptions). Another metric -- ad volume -- would be needed to reflect that.

Also, does the Internet Advertising Bureau include want ads posted on job sites, or is it tracking display ads? Newspapers lost want ads to the like of Monster, and that's been a factor as well.

July 10, 2009 at 2:34 AM 
I agree that better metrics would be helpful but the current ones do give a interesting picture and bring some assumptions into question.

Sites like Craigslist are a challenge, but even it is increasingly charging commercial firms for the type of newspaper classified advertising that was most profitable and brings the bulk of classified income.

IAB separates classified from display advertising.

The strategic linkages between newspapers and companies like Monster, and ownership of online classified advertising sites, are also reducing the impact of them on newspaper firm performance.

July 10, 2009 at 4:28 AM Ed Baron said...

You're right; the Internet is just a small part of a larger and tragic story not well explained by journalists and others.

I saw a Wall Street presentation years ago in which economic activity was plotted against newspaper ad revenues across at least five recessions. Each time revenue bounced back -- advertising is cyclical, after all -- but never to the same level as before. This time, it began dropping before the recession.

Why is this so? In America, newspaper readership has been declining for all age groups since at least 1970, 25 years before the Internet acquired its present form and 35 years before its common use.

Yet newspapers continued to price retail advertising as if this wasn't happening. Consequently on an inflation-adjusted basis retail revenue peaked in the late 1990s and has been dropping ever since.

Some might say that owners reacted to having a sick golden goose by squeezing it ever harder until it finally stopped laying eggs...

July 14, 2009 at 6:05 PM 
It's not about the classified $$ that the Internet is taking from newspaper, Robert... it's about the fact that the classified ads are free. Newspapers have to figure out how to compete with free. Free classifieds, free online pubs, free dailies.

July 14, 2009 at 10:36 PM Jeff Sonderman said...

It is not sound reasoning to deduce that the Internet is not taking away newspapers' classified dollars just because the total dollar amount of online ads does not match the dollar amount of newspapers' decline.

The issue is that the Internet has created a different market with different structure. The technological efficiencies of online classifieds reduce the marginal cost of serving them to almost zero, and so the ads are free.

Craigslist and the like definitely have taken away newspapers' classifieds, largely because they require little or no payment. So naturally the dollar amounts won't match.

July 14, 2009 at 10:57 PM 
I don't argue that online classifieds are not taking some money out of newspapers and it is true the cost structures differ. But it is not a zero sum game where newspapers lose and the Internet gains.
Craigslist is not free for jobs ads in nearly two dozen of the largest cities and is now charging real estate firms in some. Blaming them for Newspaper woes is a cop out.

July 15, 2009 at 6:12 AM 
"About half those expenditures are search and lead generation fees that don’t compete with traditional newspaper advertising."

But a business has a finite pot of advertising/marketing/promotion money and if it now spends in a new area, the chances are it has to cut back in more traditional areas.

And the point James Geluso and others makes about papers now competing against free is fundamental.

The Times carried a great piece about the Craigslist effect last year: http://technology.timesonline.co.uk/tol/news/tech_and_web/the_web/article4681804.ece

Key quote: "They cry foul because they can’t work out how to compete against a company that won’t charge for its services."

Because Craigslist and others only need to charge in certain areas to build reasonably profitable businesses --- and can give so much away free --- the overall classifieds cash pot will fall.

The pot is smaller, and newspapers' market share is disintegrating. It's a lose, lose.

The connection between internet advertising and newspaper woes is very strong.

July 15, 2009 at 6:58 AM 
The classified market comparisons print vs. online should be made for cars, help wanted and real estate seperately.

Then you might get the impression, that classifieds in printed nespapers grew with the economy, especially the job market.

Cars and real estate have been loosing market share contiously after 2000 to the web, where advertisers can place their ads for only a small portion of what they used to spend for a printed ad.

July 15, 2009 at 10:33 AM 
Nice Post!!!!! Nowadays people are using internet to see classifieds. Compared to news paper, through online people will get information quickly. So most of the people like to use online classifieds, compared to use new papers. Classified information easily reach the people.Online classifieds having up todate information.

July 23, 2009 at 3:00 AM 
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One of the world's leading academic experts on media economics and management and government communications policies, Picard is a senior research fellow at the Reuters Institute for the Study of Journalism, Department of Politics and International Relations, University of Oxford, and a fellow of the Royal Society of Arts. He was previously Director of Research at the Reuters Institute and a research fellow at Green Templeton College, Oxford, He also holds faculty posts at IESE Business School in New York, Tampere University, Finland, University of Canberra, Australia, and the Center for Media Management and Economics, Tsinghua University, China.

He is the author and editor of 30 books. Picard has been editor of the Journal of Media Business Studies and editor of The Journal of Media Economics. He has been a fellow at the Shorenstein Center at the Kennedy School of Government at Harvard University and a public policy fellow at the Reilly Center for Media and Public Affairs, Louisiana State University.

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