Goldman Sachs Says Classifieds Remain a Challenge

RSS
Follow by Email
Facebook
Facebook
Twitter
Visit Us
LinkedIn

By: Jennifer Saba

The migration of classified advertising to the Internet is “the most significant intermediate-term challenge facing the industry,” says a report released by Goldman Sachs Friday. Because of the findings, the research firm took a “cautions” stance on newspaper stocks.

Analysts from Goldman Sachs attended the Newspaper Association of America’s Readership and The Future of Newspapers conference this week and noted that the trends “don’t bode well for newspaper companies.”

Certain themes emerged at the conference that troubled analysts. The acceleration of competition in all four classified categories (auto, help-wanted, real estate, and general) from online players is currently masked by healthy listings. Yet there is pressure on pricing.

For example, according to a NAA study conducted by McKinsey, the cost of posting an online recruitment ad is a quarter of the amount paid for one in print.

With those prices, employers are posting more online ads longer, buying print ads only when jobs go unfilled for periods of time. In addition, employers are buying display ads in the classified section, driving job seekers to the employer’s Web site where positions are listed for free.

Goldman does note that newspapers are netting a significant share online, especially with CareerBuilder.com, owned by Gannett, Knight Ridder, and Tribune.

In the real estate category, new-home listings have remained in print, however “classified ads for existing homes on the market are increasingly lured online by the superior functionality the Internet offers,” the report said. Similar to employers, real estate agents (and auto dealers) are buying print display ads to drive traffic to their Web site.

The report said that Craigslist “continually came up at the conference and is a real menace.” The site can provide listings for free, limiting the ability of newspapers to compete on a price level.

The report concludes that there are many challenges for newspapers to overcome. The local paper no longer enjoys a monopoly on classifieds. “Newspapers will need to act quickly and aggressively to avoid playing catch up with their competition. … given the disproportionately large share of newspaper earnings derived from classified advertising, all publishers face a significant threat to their profitability.”

CORRECTION: The original version of this report stated that Craigslist was not-for-profit. It is a for-profit company.

Leave a Reply

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