Newspapers, It's not the stupid economy, It's Classifieds

Ed: Classified ads in newspapers have declined. Is it Craiglist? Or is Google Search another form of classified, yellow page advertising?

It's not the stupid economy, newspapers

“The biggest thing we need right now is an improved economy, because at least 60% of the revenue problem we’re facing today is a good, old-fashioned economic recession,” says William Dean Singleton.

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The chief problem is in the classified advertising business that historically generated 40% of newspaper sales and more than 40% of their profits. Between 2000 and 2007, classified sales fell $5.4 billion, or 27.7% from where they stood at yearend 2000. Recruitment revenues in the period fell $4.9 billion, or 56.3%, to the lowest level in 13 years. Automotive classifieds slid $1.8 billion, or 35%, to the lowest level in 22 years.

Real estate sales were the only major category showing consistent gains after 2000, but they plunged sharply in 2007, dropping $1.2 billion, or 22.6%, in a single year. Reasonable men and women may differ as to whether, when and how the realty market will recover now that the federal government has decided to help (or not).

Though today’s economy is perhaps the toughest in a generation, the industry’s problem began in the early days of the decade, when classified advertisers began forsaking high-priced print in favor of cheaper, highly targeted interactive media ranging from Craig’s List to Dice to AutoTrader and Zillow.

Car dealers, for example, put only 26.7% of their ad dollars into newspaper advertising in 2007, as compared with 52.0% in 1997, according to an annual survey conducted by the National Association of Automobile Dealers. At the same time, the trade association reports, Internet advertising rose from a sum too negligible to report in 1997 to 16.6% of the average dealer ad budget in 2007.

While the jury may be out on the future of real estate advertising, there is no doubt that newspapers have lost their grip on at least two of the three key classified categories they used to own...