State of the Art Classifieds, Australian Style

By: Steve Outing

For newspaper publishers trying to figure out how to turn the Internet into a profitable business environment, classified advertising is a key piece of the puzzle. Indeed, surveys of Web news publishers have consistently found that classifieds are the second largest online revenue producer for newspapers.

Recently, I completed the Online Classifieds Report, a research paper that examines the state of the art in electronic classifieds and advises publishers about strategy. This is a 70-page report, published by Editor & Publisher, meant as a quick read for news executives to get them up to speed on the issues involved in classifieds' transition to the digital medium.

In the report, I profiled electronic classifieds vendors and entrepreneurs, and sampled some of what the newspaper industry is doing. One of the more advanced classifieds efforts being developed by the newspaper industry, which is not covered in the report, is the NewsClassifieds Web site by Rupert Murdoch's News Limited in Australia. It's well worth examining as an example of what newspapers can do when they put some resources into online classifieds. While it's too early to assess the business model and the site's profitability quotient, let's look at what Murdoch's new media crew is doing Down Under.

A nationwide challenge

NewsClassifieds was developed by the Sydney-based News Interactive unit of News Limited as a means to put the classifieds of more than 100 Australian newspapers onto a central Web site. A staff of 13 maintains the service, which uses the Netscape Publishing System with an Oracle database and a Verity search engine.

According to News Interactive general manager Zebediah Rice, one of the trickiest parts of setting up the service was getting all of the papers set up to feed their ads to the Web site and then converting them into a common format -- since the papers do not all use a standard classifieds front end system.

The service launched in March 1996 with 12 papers; by July there were 65; and today more than 100. "Our proudest achievement," says Rice, "was probably getting Papua New Guinea up and running (recently). After fires, floods, looting of our files by armed bandits -- literally -- etc., we've finally got their paper, the Post Courier, online. While not part of Australia, most days it does have a fair number of employment positions that are of interest to people here -- especially people in the mining area."

Each night, the newspapers send their ads over News Limited's wide area network to the Web server for indexing and "browse-tree building," a mostly automated process. The ads are up by 5 a.m. local time.

Display ad strategy

NewsClassifieds for several months has been experimenting with putting up display ads for employment, which has become the most popular feature of the site. Visitors can see display ads from the newspapers in reconstituted HTML format, and they can upload their resumes in an e-mail message directly to the advertiser.

The e-mail resume service has been generating 150-200 resumes per week over the last several months. "We have around 10 advertisers whose ads represent 20-30% of the total (jobs) database," says Rice. "These advertisers get between 15% and 20% of their resumes over this service. Given that we haven't marketed this very much, we're quite pleased with the response."

The approach to display ads on the Web taken by News Interactive differs markedly from the company's principal competitor, Fairfax Holdings, the second largest newspaper publisher in Australia. On the Fairfax classifieds site, display classifieds ads are presented in image form -- as scanned duplicates of what appears in the newspapers. NewsClassifieds rather translates display ads into HTML format, extracting the text and adding e-mail hyperlinks and the interactive resume uploading feature into the presentation.

Rice explains that display ads arrive at the newspapers in Encapsulated Postscript (EPS) format via a dedicated line, and through a series of programs and some manual labor, the newspaper staff extracts the text and breaks each of the ads into their many individual positions vacant. When the ads arrive at the NewsClassifieds Web server, the system is completely automated. It drops the parsed ads, with e-mail links attached, into the employment section of the database and reassembles them into a Web page for the employer.

Rice defends this approach as superior to that of his competitor: "I think that even if bandwidth issues could be resolved, putting up a scanned image of a display ad is a stupid idea. ... To shovel images from the paper onto the Web is anachronistic and myopic. It fails to translate the value that you deliver through that image in the paper into a consonant value on the Net. And it doesn't take advantage of the inherent interactivity and non-linearity of the Web. I think that our solution takes steps in taking advantage of these unique features."

Ad(d) It

NewsClassifieds also has made progress in allowing advertisers to post classifieds while online. Its Ad(d) It Online feature lets you compose and submit an ad to any of News Limited's newspapers. At present, after you place an ad online, you'll get a phone call back from the newspaper to tell you the price of the desired ad and get your payment information. Rice says he'll be able to accept credit card payments over the Web in a couple months, when his transactions server is operational. He expects to be the first company in Australia to process credit cards automatically over the Internet. "No bank (in Australia) yet provides a solution, so we're having to forge our own until they get their act together," Rice says.

Quoting a price for an ad placement to a consumer while online is difficult, he says, because "there are so many special offers and discounts and quirks in the system that we couldn't build a fully automated system with price information on the Web that we could roll out across our 100-plus papers."

Rice also is trying to build a regularly appearing editorial section to entice people to revisit the site often. He had been prohibited from using material from News Limited journalists until a recent labor agreement allowed their work to be published on the Internet.

"The theory is that we want to develop what I call the NewsClassifieds Network (NCN)," Rice says. "This means aggregating in each of our seven sections -- or what I'm now calling channels in an attempt to move away from the newspaper metaphor -- a suite of services, content and features that form a community of interest, or a dominant brand that can consistently deliver value. Classifieds, necessarily, are the centerpiece of this strategy, and a pre-eminent NCN brand brings more eyeballs than ever to the classifieds."

The NewsClassifieds site currently serves an average of 17,000 impressions per day, or about 100,000 hits, with traffic growing at about 10% per month. While by U.S. standards, the site's traffic is modest, Rice says it's one of the busiest sites in Australia. The News Interactive staff also is working on several other unannounced projects which should be unveiled over the next six months.

Contact: Zebediah Rice, zrice@newscorp.com.au

Quotable

I asked Zeb Rice to assess the newspaper industry's efforts with electronic classifieds and interactive publishing. His response:

"I think most newspapers are failing to take the Net seriously enough. They generate so many billions of dollars through their traditional publishing businesses that they don't have much need to take it seriously. The industry-wide total in advertising revenue still exceeds that of all other media, including television, so they really aren't too worried. Nevertheless, with CitySearch, Digital City, Yahoo! Cities, Sidewalk and a thousand others, I think the rivers of gold that have nourished publishers for so long have a real risk of drying up in the next five to ten years. Furthermore, there is money in them thar hills, and most publishers aren't agile enough to find it. My four-year-old neice and nephew surf the Web every day. When their generation comes of age is when the shift will really begin."

An opposing view

Jim Tuchler, online director of Howard Publication, begged to differ on some of my comments in a column last week, "Angst Online; Angst in Print":

"You write that online is just like print -- some fail and some succeed, etc. In my view, you have glossed over huge differences. Like the fact that magazines are established, profitable entities that have been around for decades. A start-up mag doesn't have to worry about the evolution of technology (during the first few years). They have come up with a new flavor of soup and hope to sell enough of it. But most mags that are around for a few years are succeeding in a medium that is well defined. It's safe to say that a majority of Web publishers lose money, and there is NO defined, replicable model of money making Web sites (for newspaper folks, anyway).

"In short, I don't believe your 'so what' explanation makes sense as stated. If I had an idea for a Webzine, your article might lead me to believe that great content and marketing might help me make ends meet. Show me an example of one that has! ...

"I believe you made the same generalization in the next statement: 'Like any other industry, a few companies rise to the stratosphere quickly. Yahoo! is probably the best example of this. For others -- say Time's Pathfinder, which Clark reports is losing $5-$10 million a year -- it's a long haul to profitability, just like in most other industries.'

"My problem with this, Steve, is that this is NOT like any other industry. Other industries, like carpet making and cell phones and ear-wax removal, have models that work. We don't. What's more, other industries are evaluated as stand-alone businesses. For us newspapers, Web publishing is more defensive than offensive. Nobody is in this to make money (or they're fools). They are in this out of fear -- to protect their valuable classifieds (if they, like me, agree with your findings). So being online is evaluated not as a stand-alone basis but as a side venture, since we have the data anyway.

"I don't think of the Web as a product extension for us. And I *will* be profitable this year, on the basis of classified up-charges. It works out to be enough that I cover my expenses of putting out the news online. It's funny-money, though -- an internal transfer.

"I'd rather play offense than defense, but defense is the game right now."

Contact: Jim Tuchler, jimt@howpubs.com

Movin' On

Christopher Ma has been named a vice president and executive producer at Digital Ink Co., the Washington Post's new media subsidiary. Ma moves from U.S. News & World Report, where he was deputy editor. In the new position, Ma will oversee expansion of the arts and entertainment coverage of WashingtonPost.com, and direct new initiatives in online classifieds.

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