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Newspapers are suffering   |  October 1, 2009  

It’s easy to blame craigslist, but the real culprit is economic shortsightedness 

By Jim Harris

For newspapers it has been death by a thousand cuts: American readership has been falling by more than 700,000 a year since 2000, according to the Newspaper Association of America (NAA), and revenue was already down when the recession came along and shot another body blow to advertising income.

Take classified ads. They represented more than 40 per cent of all advertising revenue in 2000, but this stream has dwindled for U.S. papers from a peak of US$19.6 billion in 2000 to less than US$10 billion in 2008, according to NAA figures. Monster, craigslist and Auto Trader are all eating into newspapers’ profitability.

Employment classifieds—the largest category in the last decade—have fallen from a peak of US$8.7 billion in 2000 to US$2.2 billion in 2008. Automotive classified have fallen by more than 50 per cent over the same period. Only real estate classifieds grew since 2000, peaking at US$5.2 billion in 2006. This was driven by the housing bubble, but when that popped the category plunged by more than half in 2008.

When a market shifts
It’s an old saying, and it’s absolutely true: loyalty is the absence of a better value alternative. When craigslist came along it offered free classifieds and tremendous value for its loyal users. The site is now available in 570 cities and 50 countries worldwide. It claims 20 billion page views and 40 million new classifieds per month, and it has more than 50 million American users and another 10 million outside the U.S.

An online job posting in New York City for 30 days is US$375 on Monster, US$419 on CareerBuilder and US$369 on HotJobs. On craigslist it’s US$25, and the site only charges this nominal fee for job ads in 18 cities.

The impact on newspapers has been devastating: the Pulitzer-prize winning Rocky Mountain News closed in April 2009 after 150 years in business, the Washington Post downsized its business section, The Miami Herald is laying off 20 per cent of its work force, The Globe and Mail in January offered all employees voluntary severance packages, and on and on. As a result—and this is a stunning fact—more people now work in PR than journalism in the U.S. and the U.K., according to British newspaper The Independent.

I love newspapers, read them, subscribe to a couple—and I understand there is an irony in writing about this in the pages of a magazine. But here’s the point: newspapers have not adapted to the new reality and the slow death they’ve been experiencing is a predictable one. After all, craigslist launched in 1995 and by 1997 had hit one million page views per month.

How do you compete with free?
The problem is that newspapers didn’t really ask themselves that question. The approach many took was to attack craigslist, writing stories about scams and pointing to escort service ads, but this was just sour grapes.

It is only recently that viable competitive models have emerged. For instance, CareerBuilder is a joint venture between three of the largest newspaper publishers (Gannett, McClatchy and Tribune) and Microsoft. The venture is now the dominant player in online career classifieds by revenue, but it took the owners of dozens of newspapers and a tech giant to create the critical mass for the print and online effort to succeed.

At issue, it seems, is the fact that newspapers have thrived for a century and a half by competing fiercely with each other. They don’t have much experience with cooperation, but that may be the route to future success. Had they cooperated earlier they may have, for example, created a digital library of all North American articles for a single fee. Instead, we’re using Wikipedia.

So how do you compete with free? Hopefully newspapers are now paying a lot more attention to that question. The net generation spends more time online than they do watching TV, and they use craigslist to find apartments, roommates, pets and dates, and to buy or sell a couch or a car. It’s the Web’s Swiss Army knife for modern life. And craigslist and other will continue to inflict damage on newspapers until they get together and fight back with creative online offerings.


Jim Harris is the author of Blindsided, a number one international bestseller published in 80 countries. Jim is sought after as a speaker at conferences and seminars around the world. E-mail him at jimh@jimharris.com.



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