The stock market's problems are certainly outside the hands of most of us. Whether it weathers the current doldrums or not is problematic, but it will certainly affect not only our suppliers and customers, but ourselves as well.

As I take a gander at the NewsInc. Stock Index every night (it gets posted on the web site around 7 p.m. California time), it's clear that when the market in general is catching a cold, the newspaper sector at least has the sniffles.

The publicly traded newspaper companies, whether pure-play or those with a mixture of media, all seem to sag when the market itself is sagging. Despite the generally upbeat theories from those who cover newspapers at the stock brokerages, when the Dow Jones index is off five percent, the NewsInc. Stock Index seems to be off between three and four percent.

Which is good news, I guess, but any downturn further complicates the process of managing newspapers that are owned by the public companies. Newspapers are a capital-intensive business and those owned by public companies frequently end up underinvesting in infrastructure – usually because of the need to return stockholder value even in lean times.

Even if we were to discount the economy and stock market as cyclical situations, the stark truth is that we need to become prepared for a slowdown – if not a full, outright drop – in classified ad growth. Fine quotes a Southern California executive who contends that the Internet returns better results than ads in the Los Angeles Times. Reports like this should be sending shock waves through the newspaper business, but I'm not hearing a peep.

Are publishers prepared to see the cash flow of classified go away? This could happen, even though the industry has been working hard on a classified web presence – the industry consortia of Classified Ventures handling automotive and real estate, and CareerPath.com handling employment, are supplemented by companies such as AdOne (see Senior Editor Pete Wetmore's story inside). If publishers aren't ready, they don't understand the world we live in.

It has become increasingly clear in the last few months that the Internet is really, really good with the stuff we have traditionally set in agate type. Whether it's classified advertising, sports scores or stock market data, it's easier to search and retrieve it over the Internet. And we're probably going to see a big bump of people on the Internet after Christmas, when an "Internet-ready" personal computer in the $750 range will be under many a tree.

Publishers are going to have to accept the fact that the income from classifieds is going to go away.

On Sept. 25, I was at the America West conference in Reno, Nev., where USA Today Publisher Tom Curley was the speaker. Discussing the Internet and classified advertising, he said, "Let's take the worst-case scenario. If the Internet takes away classified and retail, you end up with something that looks a lot like USA Today: small classified, small retail – and a lot of ads at a high price."

No matter where the economy is going, are you prepared for a future shaped like that?

– David M. Cole

Inside ...

• Less is more, Gannett Suburban Newspapers decides
• Newspapers begin to hurt as the economy slows down
• The Los Angeles Times has punched holes in walls it didn't see
• AdOne deal opens new door on the Web
• How rich are the U.S. newspaper company owners?
• Hackers show papers they're vulnerable in a whole new way
• Persons

From NEWSINC., Oct. 12, 1998, Copyright © 1998, The Cole Group. All Rights Reserved.