WHY THOSE WEB SITES LUST AFTER NEWSPAPER CLASSIFIED AD INCOME

Traditional print revenue may be diverted unless publishers act

"I predict that most newspaper companies will go bankrupt in 10 years or less unless newspapers get so hard-core about the Internet that they dominate Web classifieds by mid-1998 in the U.S. and mid-1999 in the rest of the world."

-- Jakob Nielsen, Sun Microsystems' distinguished engineer

Not that Nielsen knows anything about the newspaper business – and he wouldn't be the first to predict the demise of said industry – but it is always a little startling to read about the potential death of something you love.

Nielsen has a doctorate in engineering and is an expert in the design of computer user interfaces. As such, he has produced a monthly or semiweekly column about the design of World-Wide Web sites for almost four years. For a long time his musings were posted directly on the site of his employer; most recently they've appeared on his own site (http://www.useit.com/).

His observations are always acute and penetrating – he takes an engineer's approach to problems and calls them as he sees them.

I had run across the quote above a couple of weeks ago and found it so profound that I used it in our other, technology-oriented newsletter, The Cole Papers. But when I finished reading Senior Editor Pete Wetmore's story inside on how television stations are lusting after on-line classifieds, I knew that we needed to give Nielsen's thoughts a wider venue.

As we continue to see double-digit growth in newspaper classified advertising linage, it's probably difficult to imagine an environment where a TV station could take away those lines. But realize that classified advertising in newspapers is a remarkably inefficient method of finding buyers or sellers.

Even I, who goes through three or four papers a day, routinely throw out the classifieds – unless I'm looking for something (we found the new home for The Cole Group in the newspaper classifieds). Whereas, if all those ads were in a computer database readily accessible, all you'd have to do is type in a question and get the answer (ocean-view mansion that rents for $100 a month, please).

Instead, we go to a lot of trouble making up pages and pages of classifieds, printing those pages and then distributing them. Imagine the savings if we could have the classified income without the expense.

That's what the TV folks are imagining. And if it isn't a local TV station, it's going to be Digital Cities or Sidewalk or some other localized on-line site.

The barriers to entry for potential classified ad competitors have always been both the technical infrastructure and the printing press. Web-based classifieds eliminate the latter, and the suppliers of newspaper technology have scaled classified front-ends down to where the whole system can run in one PC.

Barriers go down, competitors go up.

I think it's safe to say that if you are not now providing your classifieds on-line (and at a price point that makes sense for on-line), you risk losing that franchise to any one of a number of potential competitors.

Irrespective of whether or not you personally believe in the future of the Internet; irrespective of whether or not there are a sufficient number of PCs (and modems) in your area, and irrespective of whether or not there is a competitor on the horizon, you must make on-line classifieds the No. 1 priority of your business over the next six to nine months.

If you do have your classifieds on-line, take a hard look at how you are doing it: Are you using a third-party provider (thereby losing some of your profits)? Are you penalizing the customer with an on-line price that is too high? Are you using your standard research process (surveys, focus groups) to determine where your customers want on-line classifieds to go?

I pray that Nielsen is wrong, but it'll be easier – and more profitable – to prove him right by dominating on-line classifieds.

– David M. Cole

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