Rupert Murdoch once described classified advertising revenue as "rivers of gold". A few years later, having witnessed a cascade of classified advertising revenue from newspapers to the internet, he admitted: "Sometimes rivers dry up."
Alan Rusbridger, the editor of The Guardian, added his gloomy prognosis last week, predicting that newspapers faced the complete loss of classified advertising to the internet by 2020.
The trends are irreversible. European consumers now spend more time online than they devote to newspapers and magazines, and the internet is tipped to overtake national newspaper advertising by the end of the year.
Classified is a large growth area for online media owners. Last week, the Government announced that it would shift the bulk of its recruitment advertising from newspapers to online in a bid to save money. Its advertising is thought to account for 12 per cent of the UK recruitment market, worth £1.2 billion.
All of this is deeply worrying for newspapers, which rely on the likes of recruitment, property and motoring ads for a quarter of their income. And, not only do classifieds pull in the ad money, they also sell papers, especially to job-seekers.
While most newspaper groups are pushing classified revenue on to their online platforms, a typical online recruitment ad costs a third of a newspaper equivalent, meaning less money is coming in.
The response from the newspaper groups varies, but all are fighting to stem the leak.
1. Guardian Media Group recently announced a restructure to better reflect the growing profile and sales offering of its online properties. Guardian Newspapers Ltd becomes Guardian News & Media, while GMG Regional Newspapers changes to GMG Regional Media. The Guardian will be badly hit by the Government's shift of public sector recruitment advertising online, but, according to Helen Bird, the general manager for recruitment solutions, the online advertising boom is "a real opportunity" for GMG. With a redesigned online recruitment section and a strong Guardian Unlimited internet arm, she says GNM is well placed to keep spend, however it shifts, in-house. But, she also argues that clients "still recognise the value of print", especially in a market where it's hard to find good candidates.
2. Also changing its name to project a more cross-platform personality, Telegraph Media Group claims it has not been as affected by the online migration of classified as other print media. Alex Foster, the classified sales director, says: "We have innovated throughout the year with new products and ideas to expand our print business. In fact, our classified print business is up year on year." Like The Guardian, TMG is also working hard to offer advertisers cross-platform solutions, and Foster says there is a clear complementary role for on- and offline advertising. She says: "Restructuring TMG is all about being able to give (people) what they want, when they want it, and in a format that suits them."
3. Interim results from Daily Mail & General Trust (six months to March 2006) show that classified advertising at Associated Newspapers fell 9 per cent to £53 million. However, the group's online ad revenues, through sites such as ThisisLondon, have been thriving. As such, Associated New Media's response to the classified spend shift has been to invest heavily in online assets. During 2006, it acquired a host of businesses, including the overseas property site Villarenters.com and Data Media and Retail, the UK's leading operator of car classified portals, including Carsource.co.uk. It has also bought recruitment advertising businesses, including Interbase, which runs a recruitment site for the television industry. All of these have now been rolled into AN Digital, which now claims revenues of around £75 million.
4. Craigslist epitomises the scale of the challenge newspaper groups face. Craigslist is a community of local sites where anyone can post a classified ad, mostly for free. There are more than 300 Craigslist sites in cities around the world, used by more than 15 million people per month. In the US, Craigslist, which is the seventh most popular English-language site in the world, is said to run more classifieds than every newspaper combined, posting more than 750,000 new job listings each month. However, Craigslist is itself in a crowded market of other online buying and selling sites, such as Gumtree, Loot and eBay.
WHAT IT MEANS FOR ...
- Although newspapers are busy talking themselves up as "cross-platform" and "channel neutral", the relentless march of classifieds from newsprint to online is a huge concern for the industry.
- Dominic Williams, the press director at Carat, says: "Every sector has been affected: financial, cars, jobs, property - the lot. Our classified spend figures are down by about 50 per cent year on year. The Guardian's classified revenue is down by 60 per cent. There is still an argument that press plays a part in driving people to the advertising websites, but that's becoming less persuasive as the online destinations become more established."
- Newspaper groups are concerned that their content is found by search engines, which then sell ads on the back of it. Although grateful for the traffic, some newspaper grandees, including Andrew Neil, are asking if the likes of Google should pay them for their audience-grabbing content.
- Cheaper ads, better targeting and measurability are all bonuses of advertising online, and, realistically, that's the only place where many, especially younger, job-seekers are looking.
- In response, print versions of papers are prepared to be more flexible and accommodating, as in the case of The Guardian, offering front-page job ads on editorial supplements. Newspapers also argue that newspaper ads get better-quality responses. Buy cheap ads online, they say, and you get a lot of cheap, low-quality, responses.