Print Ad Losses to the Internet: It Ain't Over Yet

It wasn’t Craig’s fault. It was the internet’s. Almost $10 billion in annual newspaper classified revenue has disappeared (since its 2000 high, versus 2008) and it was essentially replaced by an estimated, unverified $100 million for craigslist with fewer than 30 employees.

But the bleeding ain’t over yet. The stone still has a few more corpuscles to squeeze out.

Look at the newly enhanced Google real-estate search. It’s awesome: useful, fast, informative, entertaining. Put in an address, browse all the homes for sale around. Who needs a newspaper? Who needs a real-estate agent? Speaking of whose death, see Michael Arrington reporting that disruptive, inexpensive real-estate service Redfin is turning profitable. Now see how classified aggregator Oodle is distributing classified ads on Twitter, which has also become the new distribution channel for news (challenging not just newspapers but also craigslist if you’re in the news biz and in the mood for a little schadenfreude).

Of course, this adds onto the the closing of thousands of advertising car dealers; the death of swaths of retail (e.g., Circuit City; and that is far from over, I think); the consolidation of more retail (and then the consolidator, Macy’s (M), cutting ad spending by half).

But that’s just advertising. I think that other arenas of newspapers’ competence could be targets for similarly disruptive attacks.

In content, I’m seeing that it’s possible for someone to come along with relatively little investment and a much smaller staff that operates more collaboratively to compete with the big, expensive traditional newsroom at low cost.

In distribution, it’s not hard to imagine someone – oh, say, News Corp. (NWS), which already controls coupons in the U.S. – to take over distribution of other FSIs (free-standing inserts – that is, circulars) and undercut the hell out of newspapers and the postal service. Distributing those ads is the main reason papers want to keep printing at least a day a week, for now.

It’s bad in the industry now but it’s going to get worse as audience shrinks and advertising consolidates or migrates. There’s no quick fix: putting up pay or copyright laws or begging for favors from pols. The only solution is to rethink and rebuild the industry – and to do a better job of it than GM has.

Comments

[a4htec:]

please don't bash me for this idea. What if the problem with our economy and why so much has changed in the way we do business and how the world operates before and somehow the delicate balance of our worlds structure has been shook apart piece by piece by the rapid changes the internet has brought upon the worlds economy. Is it possible for the changes the internet has done to every industry at the pace that it did cuase us to loose control of our economic systems. For example, if we think of all the jobs that were available before the internet came along and now its not needed there would be many industries that were killed and extinct because the internet affected it somehow. From Movies, to music, retail, telecommunication, services that were needed by professionals but now people learn how to do it themselves that alone can kill so many jobs. If you sit and think it would be endless amounts of things the internet made a negative affect on to lead us to todays economic problems.

Jul 11 07:51 AM

[Relayer10:]

You mean all of our troubles are the fault of the internet? Thank Al Gore for inventing it...and then inventing the next cause of economic calamity- Global Warming...the biggest boondoggle ever perpetuated by uninformed media types. These weird sun spots...funny how the media just ignores the credible experts. (like the EPA and all others). Just like business ignoring the rise of the internet.

Sorry....the comment writer caused my victim reflex to engage. I'm glad to know that I am not at fault...it's the internet.

The internet has provided a new paradigm. During it's rise, most newspapers had the opportunity to own and control huge swaths of it. They had money, and control of the content. I actually had a newspaper owner tell me (in 1995) that the internet is the enemy- never bring it up again. We were being offered a partnership in an ISP that only wanted to place their servers in our warehouse! We would have owned all the content AND the only method of distribution...for FREE! I mention this, because it was a pattern I saw for almost 20 years with newspapers. Arrogance that they could always control or crush the internet. Continued raising of classified rates to private party, failure to use the content for the benefit of consumers and themselves caused new industries to proliferate (craigslist, angies list, and others). The internet is NOT the bad guy...it is the wave that changes the way we do business. We will adjust over time. The music industry is a great example of that adjustment- thank Steve Jobs for saving the business from pirates! But old time music execs want the "good ole days" back.

Like the famous song...."Arrogance Killed the Newspaper Star" and they have no one to blame but themselves. High level, no vision execs squashed innovation. The market will eventually flush them. Kind of like our current government execs with no business experience running the economy. That seems to be working well too...WE are to blame for that as well...not the internet!

Follow Mr Jarvis- his articles are really spot on 90% of the time! The other 10% is because he comes from the content side of the business- not the revenue generating side.

Jul 11 09:42 AM

[a4htec:]

I understand that the internet came along and industries, businesses, people and just about everything and anything must diversify, evolve and integrate itself into the new world the internet has created in order to survive. The rapid expansion and growth of the internet and the changes in how we do business added with its ability to swallow up enormous amounts of money to one sector or one persons bank account can't be good for economic stability. Back when the flow of money was more controllable and less complex, more transparent and unpredictable, government could understand and stablize to recover the economy through policy that could effectively manipulate our economy. Also the stock market can no longer function with stability and predictability because the internet can often create bubbles and attract investments to innovations that sometimes either swollow up vast amounts of money and unsustainable growth or just over estimated return on investments. The stock market and world economic structure has changed and is out of the governments control which they atleast had ways but more importantly more time to take measures to keep things in balance but now with the speed at which things can change driven by the internet and one little idea, invention or website like ebay or craigslist or software like torrents or even youtube could change or cripple multi billion dollar industries and the flow of money those industries used to create. So I believe the fact that the internet has the ability to change the flow of money or divert it from one industry to another and off balance the stock market and economy so randomly and quickly that we cannot ever adjust quickly enough to keep things incheck. When Government economic policy and monetary policy can stimulate and control the flow of money better in times of economic bust we will remain in this depression for a long time.

Jul 11 06:16 PM

[Rokjok777:]

Bingo! a4htec gets a massive Gold Star! I've been thinking about this theme for quite some time. When the internet first got going, lots of people recognized its disruptive potential. This caused the dot-com boom: everything was going to be offered centrally in huge dominant online marketplaces, etc etc. That didn't happen as fast as people expected, so most of them crashed. But Bill Gates famously said "things change less than you think they will in two years and more than you think in 10 years".
The internet allows the global levelling of two key pillars: information and labor. A buyer in Bangkok can find a seller in Rio with NO middlemen. High-priced offers of all kinds that used to be shielded and protected in the 1st world are now exposed with no place to hide. And have a look at the jobs that are available now at India's outsourcing companies: it used to be call center workers, then it was software developers, then CAD engineers, now its accountants, equity analysts, medical X-ray analysts, even the journalist writing copy for your local online newspaper probably lives in Delhi. And guess what: not only are they paid one-fifth what their former 1st world counterpart was paid, but they're very educated and very motivated. There's a good chance that call centre worker you just spoke to when you called your US insurance company has not just a bachelor's degree, but a masters degree. They have a local word for students who shame their families by not getting ALL A's in school: the word translates as "donkey". They all know that if they stumble, there will be 100 people behind them who will take their position...
Hence the IT business, selling shovels to these gold miners, is still zooming along.
America's renewal will come NOT by shovelling money into corrupt Wall Street casinos or finding new ways to kill people on the other side of the globe but rather by redirecting money into EDUCATION, TECHNOLOGY, ALTERNATIVE ENERGY, INFRASTRUCTURE, AGRICULTURE, and LOCAL SELF SUFFICIENCY. IMO.


On Jul 11 07:51 AM a4htec wrote:

> please don't bash me for this idea. What if the problem with our
> economy and why so much has changed in the way we do business and
> how the world operates before and somehow the delicate balance of
> our worlds structure has been shook apart piece by piece by the rapid
> changes the internet has brought upon the worlds economy. Is it possible
> for the changes the internet has done to every industry at the pace
> that it did cuase us to loose control of our economic systems. For
> example, if we think of all the jobs that were available before the
> internet came along and now its not needed there would be many industries
> that were killed and extinct because the internet affected it somehow.
> From Movies, to music, retail, telecommunication, services that were
> needed by professionals but now people learn how to do it themselves
> that alone can kill so many jobs. If you sit and think it would be
> endless amounts of things the internet made a negative affect on
> to lead us to todays economic problems.

Jul 11 06:30 PM

[Mission Imp...:]

Has anyone here read Kurt Vonnegut's "Player Piano"?

People are starving for work -- for gainful employment -- in the brave, new world he imagines. Not long ago, his idea seemed to be part of the distant future. Now, the Internet makes it seem more and more likely to happen -- a week from next Tuesday!

Jul 13 12:47 PM

[NSA_Randy:]

To your point about delivery of FSIs, the industry is working towards opt-in delivery of ad packages to non-subscribers to take advantage of infrastructure already in place. Gannett is doing this and others are following. FSI advertisers are taking notice so don't write off this area so soon because News Corp still needs someone to deliver the FSI - either USPS or newspaper carrier. The internet will never replace the printed FSI's ability to drive $sales.

Jul 13 03:19 PM

[jay fredric...:]

Excellent discussion going on here.

Jul 14 09:30 AM

[Relayer10:]

Regarding FSI's....they are under extinction watch as well. Right now, traditional pre-print advertisers are aggressively looking for more effective and less expensive methods. Supermarkets entice by using membershop cards- and opt in email delivery of their flier. The real beauty- it's not a far leap to tailor that message to exactly the customers most likely to buy specific products. High end products to high end customers with a buying history for example (Wegmans already does this),

I get both Target and Best Buy in similar fashion. It is not very hard to merge that knowledge with SEM...and look out insert marketers.

Thank Al Gore again for giving the retailer a huge tax penalty (Cap & Trade) for using carbon to print and then truck the insert across the country. The cost of printing and trucking alone is in the billions annually. Even without Cap & Trade, the incentive to stop printing and trucking is HUGE!

What fraction of the savings will it cost to convert to opt in email, and search engine marketing to fund the conversion- especially if Cap & Trade passes? How many unemployed tech types are working on this right now? How many newpapers execs would not listen 5 years ago when the idea was brought to them?

Jul 14 09:01 PM

[NSA_Randy:]

They are trying, but have found that nothing drives sales like FSIs. It is way too early to write off printed FSIs or newspapers for that matter. Email and SEO may be cheaper, but they drive a lot less footsteps to the store.


On Jul 14 09:01 PM Relayer10 wrote:

> Regarding FSI's....they are under extinction watch as well. Right
> now, traditional pre-print advertisers are aggressively looking for
> more effective and less expensive methods. Supermarkets entice by
> using membershop cards- and opt in email delivery of their flier.
> The real beauty- it's not a far leap to tailor that message to exactly
> the customers most likely to buy specific products. High end products
> to high end customers with a buying history for example (Wegmans
> already does this),
>
> I get both Target and Best Buy in similar fashion. It is not very
> hard to merge that knowledge with SEM...and look out insert marketers.
>
>
> Thank Al Gore again for giving the retailer a huge tax penalty (Cap
> & Trade) for using carbon to print and then truck the insert
> across the country. The cost of printing and trucking alone is in
> the billions annually. Even without Cap & Trade, the incentive
> to stop printing and trucking is HUGE!
>
> What fraction of the savings will it cost to convert to opt in email,
> and search engine marketing to fund the conversion- especially if
> Cap & Trade passes? How many unemployed tech types are working
> on this right now? How many newpapers execs would not listen 5 years
> ago when the idea was brought to them?

Jul 15 09:38 AM

[Relayer10:]

No question that currently the printed insert works much better right now. SEM (NOT SEO) will and is changing the game. SEO is "optimization". SEM attaches search parameters to information. Imagine if Best Buy suddenly decides that they can now target potential customers like this...."income over 100,000, TV over 5 yrs old, NO HD in home"....and then an email goes to them advertising all things HD TV and accessories, and the Geeks set it up TOMORROW. Or a supermarket that can find customers that regularly buy imported cheese..you get the picture. Right now, it still works to send out a mass advertisement to general population (I know that newspapers can "zone" but it still is not address or product specific) and it will take weeks for mass retailers to print and meet newspaper advance deadlines. The model of FSI begins to break down when critical mass is no longer a given. As circulation drops, that is inevitable. The best newspaper customers continually age, and drop out of the buying categories, That is also a fact, and inevitable. Urban areas have already seen it at faster decline rates. I live in the Pittsburgh area, and supermarkets are now out of both newspapers- have been for years. Several other traditional have followed them. They are now using marriage mail. That trend will continue and accelerate. The time is right now for newspaper execs to look in the mirror...accept that change is now here....and invest in the future. The good old days of market domination are not coming back. The sooner that is internalized, and real commitment to new emerging methods are started....the more likely they are to survive.

Family owned papers seem to realize this fact, and they seem to be moving quicker. Unfortunately, big media companies have bought most of those in the last decade. The exec there is very unlikely to champion anything that their superiors did not approve first. Innovation was squashed years ago, and the middle level possible innovators were either pushed out of companies, or made fearful of losing a job for speaking up, or act locally without bucking a large bureaucracy at corporate. And much worse- the high salary execs have been eliminating those people in their companies most likely to come up with the "new idea".

Time to re think the model. While there is still decent income and some time to do it. I predict that the immediate answer will be to fire another 10-20% of the workforce....because high salary execs will try the old way..."cut to profitability" without a real commitment to change anything of real substance. I've been out of the business for a few years, and it really hurts to see my industry commit suicide.


On Jul 15 09:38 AM NSA_Randy wrote:

> They are trying, but have found that nothing drives sales like FSIs.
> It is way too early to write off printed FSIs or newspapers for that
> matter. Email and SEO may be cheaper, but they drive a lot less footsteps
> to the store.

Jul 15 11:58 AM

[a4htec:]

I wonder if newspapers ever thought of selling their daily newspaper through kiosks that are accessible where ever you can purchase a regular paper or on busy street corners. They can sell their paper for like a quarter and you have the option to insert your own usb flash drive and have it copied directly to that or email it to a personal email account to be read later on. Wouldn't this attract more people to read their paper because of the low cost for next to nothing a person who would normally not buy a paper can spend a quarter and get todays local news and coupon printouts or just simply read directly on the kiosk. For first time buyers they can just purchase a new flash drive for a few bucks and attach that to their keychain. This way of advertising would actually give businesses more ways to advertise their product in full sound and visual mini ads and videos. And the newspapers can update their papers instantly via the net everyday and their front pape headlines can stand out on a big screen on the kiosk. For me I would spend a quarter each time im at the store or purchase a whole weeks subscription for a few bucks and have it emailed to me each day for that week this way I think newspapers would get more of their papers sold to new people who wouldn't normally pick up a paper at the news stand and now would just to get coupons or the latest local news.

Aug 05 04:01 AM