Classifieds: Secular, or Cyclical?

By: Mark Fitzgerald Though it may not seem so to newspaper publishers on these long and cold winter nights, the economy will eventually turn positive again. When that day comes, what will newspaper classified advertising look like? What classified is coming back, and what is going away?

Those are probably the two most vexing ? and important ? questions newspapers face as they try to distinguish among the permanent, so-called secular forces driving advertising to digital media and the deep cyclical economic downturn that continues to chop away at auto, real estate, and recruitment classifieds.

After every other downturn of the past three decades, classified has come back ? often gaining a greater share of news- papers' total advertising. But will that happen again?

Last month's quarterly earnings reports brought a new avalanche of bad news about classifieds. Newspapers uniformly reported the big three categories of help-wanted, automotive, and real estate were down more than 20%. Tribune Co. said its real estate classified revenue plunged 44%. But some executives also argued the carnage indicated the collapse of classified was more cyclical than secular.

Gary Pruitt, chairman and CEO of The McClatchy Co., is one executive who thinks classified is coming back, though not all of it. He told analysts last month that the poor economy accounts for the majority of plummeting classified at McClatchy, which has been especially hit by the collapse of housing and all that goes with it in Florida and California.

"We will still see classified display advertising from home builders, larger real estate companies, auto dealerships, etc.," he said. "They will need to advertise. That advertising, while falling into classified, in some ways is more akin to retail sort of advertising. So classified is not going away entirely."

What's probably not coming back, Pruitt added, is the small liner-type classified, especially in help-wanted, which he believes is most affected by secular changes.

MediaNews Group executive Pete Casillas, on the other hand, declares that when it comes to the future of classifieds, "I'm in the secular camp rather than the cyclical." Casillas is MediaNews' classified ad chief, but, tellingly, his title is vice president of multimedia sales.

"If classified is not entirely moved to the Internet, that ultimately will be the venue in which we try to building back that [classified] marketplace," he says. For newspapers, the future of classified will be targeting small and mid-sized businesses with online offerings that beat Craigslist and the Yellow Pages.

Why small business? In many categories, Casillas notes, the biggest classified advertisers are ? or used to be ? small businesses, and not private parties. The pet classified category, for example, grew because breeders were looking for customers. But when Craigslist came along, those businesses jumped on that vehicle, he says, "and we let them."

But newspapers with their deep roots can match the "localness" that people feel with Craigslist, that sense that they are buying from their neighbors.

In the three big classified categories that have most troubled newspapers in this downturn ? jobs, real estate, and automotive ? newspapers stand a chance of preserving some print ads if they concentrate on their local brand. Newspapers made a big mistake boosting the brands of national players like Cars.com or Monster with their partnerships. "What's left for the local print franchise to go after?" Casillas asks.

Take automotive. Newspapers over long years have come to know all the general managers of auto dealerships. Sell them a mix of some print and more online to drive customer traffic while using Yahoo's APT targeting technology to deliver specific leads that don't come through something like Cars.com or AutoTrader.com.

Some categories or subcategories of classified lend themselves to print and will remain in the papers, argues Mort Goldstrom, the Newspaper Association of America's vice president of advertising development. In real estate, for instance, house auctions work best online, but the open-house subcategory "seems to be better presented in print."

Print classified, especially liner ads, will look and read differently, Goldstrom predicts. Gone will be descriptions of "cream-puff" autos in favor of bare-bones descriptions that send readers to a Web site.

And classified pages will be organized differently. "In help-wanted now, ads are sorted by job title," Goldstrom notes. But the most effective way to get hourly workers may well be not by the job, but by location, or the distance of the commute.

But some classified categories that newspapers dominated for decades ? such as apartment rentals and used cars ? likely are leaving the print edition for good, he adds.

One paradox for newspapers is that the classified marketplace today is bigger than it's ever been, Mike Rutigliano, CanWest director of digital media, told the Western Classified Advertising Association this fall.

"That's the good news. The bad news is, we don't have it," says advertising veteran Tony Marsella. "The reason we don't have it is we let the free posting services, the Craigslists, etc., come in and take it away."

On the other side of the recession, newspapers taking an online-first approach can build up classified in print as well as online by aiming at those very specific private-party categories ? from antique furniture to photography ? that went away to free sites, says Marsella, president and COO of Ranger Data Technologies, a classified ad software developer.

"Go after those sites aggressively," Marsella urges. Newspapers can portray themselves as trusted local businesses with the best interests of the community in mind ? contrasted with national networks that have no stake in the community. He argues that Craigslist is especially vulnerable because of its graphic "erotic services" and other sexually oriented ad categories.

"Go after them. Ask the grandmothers, you can leave your grandkid alone with the newspaper for an hour without harm," says Marsella. "Could you do that with Craigslist?"

One thing publishers must not do, even in these tough times, Marsella says, is conclude that newspaper classified's time is coming to a close. "I'm tired of hearing that ? it's managing the decline, it's an orderly retreat. I tell you, the people who believe least in the newspaper's power are people at the newspaper."