Craigslist to Top $100 Million?

As newspapers struggle with declining ad revenues online classified ad site Craigslist is forecast to exceed $100 million revenues this year. That’s a whopping 23% increase of last year and its bottom-line is likely to be even healthier. First launched in ’95 as a email list the company was quick to undercut newspapers and appeal to a wider audience. Newsprint still dominates but over the last decade has seen its revenues drop 50% from $20 billion in 2000 to $10 billion last year.

Employment advertising, once the a mainstay of the newpapers is expected to account for some 85% of Craigslists revenues which leaves significant potential for future growth in other areas. It is also worth noting that 40% of their revenues comes listing in just three major cities; New York, San Francisco and Los Angeles. Again this leaves significant opportunities for further growth.

Craigslist employs just 30 people!

Gannett Deliver Bad News

The plight of newspaper revenues was brought home in the latest figures from Gannett.
Gannett’s stable includes USA Today and Newsquest who operate 300 newspaper titles in the UK. News quest ad revenues are down almost 40% in the first quarter 2009 with property ads down a massive 60%, recruitment 51.4% and motors 43.2% in motors. In the forth quarter 2008 Newsquest ad revenues fell by 29.3% year on year, with classifieds down 35.3%.

USA today posted a 26.9% year on year revenue drop with a corresponding 28.2% drop in ad revenues.

Shares have fallen 87% in Gannett over the last 12 months.

In the coming weeks, Media General, New York Times and McClatchy will report their results. But what is clear is the ad spend is no longer a given and although recovery will come in the future it is questionable where the ad spend will go. This leaves the newspapers having potentially change their business model in difficult times.

Hearst to Move Onto eInk?

It is unclear as to whether individual media companies will follow the Amazon route and build their own devices and try and control their own channels or whether they will adopt a more open and inclusive approach to the market.

Hearst Corporation, the giant media conglomerate, announced it will launch an e-reader of its own by the end of the year. Hearst’s magazine and news papers include SmartMoney, Esquire, Oprah Winfrey's O Good Housekeeping, Cosmopolitan, Popular Mechanics, Seventeen 16 daily and 49 weekly newspapers including San Francisco Chronicle and the Seattle Post-Intelligencer both of which Hearst has put up for sale.

The first unkown is the device which is almost certain to be based on eink with Hearst Interactive Media being among a group of strategic investors that have together poured more than $150 million into E Ink’s technology. Will they use Plastic Logic device or opt for their own? What is becoming clear is that the Hearst e-reader will almost certainly be larger and wireless to accommodate the format of newspapers and magazines. This will help reproduce the more-complex layouts of print periodicals as well as letting advertisers buy spots in the sizes and format they're already used to. However for now they will have to accept greyscale which to some degree will dilute the appeal of their glossy magazines to consumers and to their advertisers. There is some speculation that Hearst is exploring making the device foldable or rollable to enhance portability.

The second unknown is the business model with many predicting that the will attempt to move from the free online to a subscription model a tricky move with only a few such as Wall Street Journal sticking ridgidly to it. However we note that Newsday has declared their intent to move to a paid model for their online edition.

The Hearst e-reader may work if readers see added value but we are now seeing the collapse of newspapers as we have known them for over 100 years. Advertising revenue, the shift of classified advertising to the likes of Craigslist, online free news, services such as Google news and the news on your mobile are all compounding to cannibalising the model.

I Want 'My News', Now and for Free!

Much has been written of late about the state of the newsprint industry. The US market appears to be in free fall, with the operative word on many tongues being ‘free’. Journalists are losing their jobs, papers are up for sale, or sailing closer to the wind and the advertising revenue, which once made this sector so lucrative is either drying up or electing to go elsewhere. Newsprint publishers are ceasing to print on paper and going free online.

Does this mean that newspapers will disappear tomorrow – No? Does it mean that some will fall – almost certain?

Newsprint has a long history which has local, regional and global pressures. What once was local copy in Malaysia, a city in Scotland, national press in Australia is now available instantly to us all globally, 24 x 7. Services such as Google aggregate the news and segment it to fit our tastes, alerts constantly feed our favourite key words. Journalism is fast becoming democratised, where every blog, web article is becoming a potential news feed and the letter to the editor is often no longer mediated, but instantly posted and encouraged.

It seems a long time from the birth of the tabloid at the beginning of the 20th century. This explosion was fuelled by mass literacy, world events and the public’s insatiable appetite to read ‘spicy news’. In the late 20th century restrictive practices were broken in the UK and everywhere we saw the rise of the free local paper. Established local papers were driven to change or die. The the whole advertising model came under threat from the free classifieds such as Craiglists and the Google online ad machine. In the UK market, the downturn in the economy has hit the spending of big newsprint advertisers such as estate agents and the motor trade.

The increased demand in recent years by advertisers for 100% colour resulted in UK publishers investing in newspaper presses, but now publisher/printers are looking to close shifts or working with other newspaper Groups to close presses altogether. Many UK publishers are now looking to reduce costs by outsourcing their production facilities overseas. To compound this further, UK newsprint has just seen one of its largest cost increases in recent years.

Mass connectivity and technology literacy is now fuelling change. Increasingly everyone is connected and online. The person on the street with a mobile, has often became the photographer and sometimes even the journalist.

In an attempt to create loyalty and broaden their appeal UK papers in recent years have started to trade on their brand. Bookclubs acting as white label stores, glossy inserts full of gadgets and special offers, clubs from wine to dating were all born, CDs and DVDs were enclosed as special ‘extras’. Is this the future of newsprint or merely an attempt to raise revenues and cross subsidy?

Hard economics have started to bite and along with technology are opening up both new opportunities and new threats. Newspapers, so long a safe and predicable media has failed to respond. Readers have become more discerning and eclectic, wanting not general, but ‘My News’. Today the industry appears like rabbits frozen and caught in the glare of the digital headlights. Layoffs, closures, debt are all hovering like vultures around many well known names. Journalism is torn between authoritative column inches and democratised blogs. We have previously written about the cartoonist, who are now changing their own model in response to the pressure on their strips.

Papers such as the Kansan in Kansas City may point the way forward for a community press , The New York Times and others have to grapple with the challenges of general or what is now ‘commoditised news’ and although it seems that the ‘specialist’ papers such as the Financial Times and Wall Street Journal have a captive model based on their insights and commentary, we note that 80 jobs went yesterday at the FT.

The one thing we can be sure of is that the landscape and business model is changing. ‘My News’ is real, ‘Free’ is real, many want their news ‘now’ and fed to them 24 x 7.

So where do you advertse?

An interesting article from Gavin O’Reilly in the Independent last week. He argues that far from the death of newsprint the industry is seeing increased circulation and advertising.”These days it is nearly impossible to find a media analyst who actually reads a newspaper or who can see anything other than doom and gloom for the industry.”

He cites circulation not just in India and China, with paid circulation growing globally by 1.9 per cent in 2006, with sales of 510.4 million copies a day. The number of paid-for titles he reports are at a record 11,142, up 3.1 per cent on the previous year. The there is the rapid growth in free dailies - titles such as thelondonpaper, 20 Minutes, Metro and the rest - which together distribute 40.8 million copies a day.

Finally he states that newspapers and magazines are actually the largest advertising medium with a combined 42.3 per cent share of the market.

Interestingly, UK research company TGI, claim that newspaper readership has grown by 2.1 per cent over the past five years, with readership among 15-24 year olds growing by 6.9 per cent and readers over 65 growing by 3.7 per cent.

The key to media exposure he states is the time that people spend reading, watching, using or listening to that particular medium. US private equity fund Veronis Suhler Stevenson, claim that for every hour of TV viewing, advertisers spend $40.1m (£20.2m). For each hour of radio they outlay $19.3m (£9.7m) and for the internet advertisers only spend $65.4m (£33m).

Interestingly, newspaper advertisers spend $316.3m (£160m) for every hour of reading, eight times more than TV. He claims that this reflects the quality demographic that a newspaper delivers.

What is clear is that there is no silver advertising bullet. No one media that kills all others. What we can see is that advertising is getting supposedly smarter and starting to target consumers based on know likes and dislikes and it is inevitable that the internet has the relationship and technology to do this best. However, cost and audibility are key and no advertiser will choose only one channel to their campaign and therefore as the search engines hover up new players they must also get into all channels.