Will Classified Advertising Come Back?

Like & Share E&P:
RSS
Follow by Email
Facebook
Facebook
Google+
http://www.editorandpublisher.com/feature/will-classified-advertising-come-back/
LinkedIn

By: Alan D. Mutter

Nowhere else have newspapers suffered as mightily in the last five years as in the meltdown in classified advertising, where nearly $14 billion in highly profitable revenue was vaporized between 2005 and 2010.

The classified ad crash, of course, resulted from the worstglobal economic calamity since the 1930s. The real estate market collapsed. Employers stopped hiring. Two of the three domestic automakers plunged into bankruptcy.

The impact on newspapers was rapid and profound:

While classified advertising delivered more than 40 percent of newspaper revenues as recently as 2000, want ads produced barely 22 percent of the industry’s revenues by the end of 2010 – the lowest contribution in 50 years. To put it another way, the classified crash was responsible for 58 percent of the drop in revenues that brought total newspaper ad sales to some $26 billion at the end of 2010 from an all-time high of $49.4 billion in 2005.

Now that the economy is – sort of – on the mend, the big question for publishers is how much the classified advertising market will rebound. Although economic upswings historically have reinvigorated classified advertising, this time may be different.

The principal reasons that classifieds may never regain their former strength are that people are hunting for jobs, buying cars, and shopping for homes in decidedly different ways today than they did even five years ago. They have moved to the Web. And employers, car dealers, and real estate agents are enthusiastically following them.

The classified collapse, which began with a trickle in 2006, turned into a torrent as the economy unraveled and continued declining in 2010 despite the nascent recovery. Here is where we are today:

Total recruitment advertising revenue at American newspapers was about $750 million last year, or 85 percent of the $5.1 billion produced by this vertical in 2005.

Real estate sales were approximately $1.1 billion at the end of 2010, or 76 percent lower than the $4.6 billion achieved in 2005. Automotive revenues were about $1.2 billion last year, or 73 percent of the nearly $4.6 billion booked in 2005.

The above projections are based on data published through the first nine months of 2010 by the Newspaper Association of America; the projections for the final three months of last year are mine.

To be sure, classified advertising is likely to improve if the economy continues to recover. Employment advertising, for example, advanced 5 percent in the third quarter of 2010 over the prior year’s level. But, as discussed previously, recruitment advertising remains deeply depressed.

Fundamental shifts in consumer and advertiser behavior in each of these major verticals suggest that they never will return to their former glory. While many publishers recognize the enormity of these secular changes, others still have not come to accept them. But every publisher has to face these facts:

Employers have learned to post vacancies on their own websites or on low- or no-cost job boards targeted to their particular industries. In recruitment as well as the rest of the classified verticals, the online media are significantly cheaper – when they are not simply free – than the rates traditionally charged by newspapers.

Auto dealers know that eight hours is the median amount of time consumers spend shopping on the Web before contacting a dealer. Car manufacturers and sellers are focusing their efforts on intercepting customers as they make their decisions online, not luring them to dealerships after the fact with broadcast or newspaper ads promising free pony rides. In addition to avoiding the nuisance of cleaning up after the ponies, interactive marketing enables dealers to get the names, e-mail addresses, and phone numbers of live prospects – something you just can’t do with print.

The vast majority of real estate agents have said in countless surveys that they know newspaper ads don’t sell houses. Agents buy ads to please sellers, who want some tangible proof that something is being done to market their houses. As sellers and buyers become accustomed to shopping at sites like Realtor.Com or Zillow.Com, real estate agents will put more of their dollars into those venues, which are not only cheaper than newspaper ads but also make it possible to make contact with prospective customers.

Ironically, a strengthening economy will chew into sales of the strongest line of classified advertising left at most newspapers: legal advertising.

While no one in the industry tracks the volume of legal advertising, some publishers report anecdotally that notices associated with mortgage foreclosures, tax delinquencies, bankruptcies, and other legal matters recently have been providing up to 30 percent of their total ad volume.

Because a lot of legal notices will dry up as the economy improves, publishers are worried about their dependence on such business. The hope, of course, is that the traditional job, auto, and realty categories will perk up to offset the decline in legal notices.

But will they come back to 2005 levels? Don’t count on it.

Alan D. Mutter is a newsman, turned Silicon Valley CEO, turned consultant and educator at the Graduate School of Journalism at the University of California at Berkeley. See his blog at Reflections of a Newsosaur (newsosaur.blogspot.com).

Published: March 9, 2011

Comments:

Your email address will not be published. Required fields are marked *