Online Classifieds Boost Ad Rates; Consumers Don't Mind

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By: Steve Outing A key finding in a new report about newspaper classifieds online will make publishers and classified managers happy. If you read between the lines of the Newspaper Association of America's "Electronic Classifieds Intelligence Report," released this week, you'll realize that when a newspaper raises its print classifieds rates in order to support the inclusion of ads on the Internet, ad-buying consumers don't care. They'll pay the premium with nary a complaint.

Most of the 30-plus publishers interviewed for this report say that it gets even better, because consumers seem pleased at the extra value they get for their ads, and are willing to pay more. Among those newspapers that in the recent past have increased their overall classified rates between 1% and 15%, a NAA survey of executives responsible for more than 100 online newspapers "showed there was virtually no customer resistance to classified rate increases -- regardless of the size of the jump -- when they were tied to Web advertising initiatives," says the report's author, Peter Zollman.

What Zollman found is that the online version of a newspaper's classified ads are increasing in perceived value by consumers. And at last, newspaper print-side executives are noticing; it's not just the newspaper new media managers that are singing the praises of online classifieds. The author quotes ad executive Dave White of the Times Union in Albany, New York, as saying that his paper "started out underconfident" about the value of online classifieds, but has learned that they work for the advertiser and for the paper.

State of newspaper e-classifieds

I wrote a similar report about online classifieds for Editor & Publisher in 1996, so it was with great interest that I read Zollman's work -- which is the first of several reports due to be rolled out this summer by NAA dealing with various segments of the online classifieds topic. This first report concentrates on business models for newspaper classifieds online; another report, to be called "Seize the Day," will be a "toolkit" for smaller newspapers that haven't yet taken their classifieds digital; and another (also authored by Zollman) will cover "external acquisition of data for online classifieds" (in other words, how online newspapers can do deals with auto dealers and associations; real estate Multiple Listing Services; etc.).

Two years after the E&P classifieds report was published, it's interesting -- and a bit depressing -- to see Zollman write that only about half of the daily newspapers in the U.S. have Web sites currently, and about 60% of those have at least some of their classifieds online. Given the generally rosy accounts of online classifieds initiatives actually making money for newspapers, it remains shocking that so many publishers are still missing the opportunity.

"We are for the first time seeing Internet profits," the report quotes Scott Fischer, president of the Western Newspaper Division of Freedom Communications. "Most of them are attributable to the classifieds. ... We're doing some banner ad and other revenue, but the bulk is classifieds."

Business models haven't changed much for newspapers doing online classifieds, and I was a bit disappointed to learn that the forced upsell -- raising classified rates across the board to support new media -- hasn't been joined by very many other profitable models. For the most part (and of course there are exceptions), newspapers continue to simply port their ads online in order to gain some incremental revenues from the core print ads. Too few publishers have taken the initiative to create brand new online classifieds businesses and pro-actively search for brand new revenue streams.

An interesting tidbit from the report is about a newspaper that puts its classifieds online with a voluntary upsell model. Advertisers are told on the phone that if they do not want their ad on the Web, their bill will be $1 less. Only 10% of classified advertisers -- all of them individual consumers rather than businesses -- opt to omit their ads from the paper's Web site. If that's more than anecdotal, it's more evidence that a forced upsell model has little down side.

Just do it!

Zollman points out that there are many models worth trying in the online classifieds space. "Newspapers can be cautious or aggressive; they can outsource or do it themselves; they can buy or license technology; they can charge for online ads or offer them as another service to readers and advertisers," he writes. "The most important decision, however, is the first one: To put the ads online."

Newspapers that decide not to place classifieds online "may find in a few years that they no longer run many classifieds in print -- and that 30% or 40% of their revenue has disappeared with their classified advertising section," Zollman writes. The reason, as we all know by now, is that auto dealers, real estate agents and employment agenices will go online directly, as well as increasingly work with national "category killers" like Auto-by-Tel, Rent.net and Monster Board.

In one chapter of the report, Zollman reports on the odd situation in Las Vegas, Nevada, where one of the papers in the joint operating agreement that keeps it a two-newspaper town does not have rights to publish the newspapers' classifieds on its Web site. The Las Vegas Sun's site has partnered with Classifieds2000, a national classifieds aggregator that many in the newspaper industry view as a nemesis. That's just another example that confirms Zollman's contention that there are many business models that publishers should consider in the online classifieds space.

No free lunch

One issue that wasn't covered in the NAA report was how newspapers can compete with the purveyors of free classified advertising, such as Yahoo! and Classifieds2000. At the same time that these online classifieds initiatives grow and get better at serving local markets, the newspaper industry is increasing the costs for consumers to place newspaper ads (with the added value of them being online). How wise is that?

I asked Zollman about that issue, and his advice to newspapers who are forced to compete with the free-ad sites is that "the best thing a newspaper can do to compete is do the best darn job they can with their online classifieds." He doesn't believe that the quality of free ads on those sites can match newspapers'; the car ad on the local edition of Yahoo! may be old and the car already sold, while newspaper ads are professionally maintained and consumers can be assured that they are up to date. "I don't think that in the short term, those (free-ad) sites can get much of a toehold," he says.

Zollman concedes that free classifieds are a threat to be taken seriously, and suggests that newspapers in a region consider aggregating their classifieds in order to offer the highest quality and deepest classifieds marketplace in their region.

Disclaimer: Peter Zollman is an independent online news industry consultant and writer working for the NAA. He also writes periodically for Editor & Publisher, which publishes this column.

Contact: Peter Zollman, pzollman@aol.com

Steve

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This column is written by Steve Outing exclusively for Editor & Publisher Interactive three days a week. News, tips, and other communications may be sent to Mr. Outing at steve@planetarynews.com

The views expressed in the above column do not necessarily represent the views of the Editor & Publisher company

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