Feb. 1, 1999
Vol. 11, No. 3

PURCHASE OF AD ONE SHOWS WISDOM, EVEN IF IT'S OVERDUE

On-line classifieds have a more secure future with media owners

Is this an instance, as my grandmother would have said, of closing the barn door after the horses have left?

In other words, have newspapers already lost the on-line classified franchise? Is last week's purchase of AdOne Classified Network of New York City by a consortium of five newspaper companies just too little, too late?

Perhaps. Nonetheless, the acquisition is interesting on a number of levels:

  • The interlocking ownership question. The AdOne consortium includes Advance Publications Inc. (Newhouse Newspapers), Donrey Media Group, Hearst Corp., MediaNews Group Inc. and E.W. Scripps Co. The consortium that owns another newspaper classifieds company, Classified Ventures LLC of Chicago, includes Central Newspapers Inc., Gannett Co. Inc., Knight Ridder Inc., The McClatchy Co., New York Times Co., Times Mirror Co., Tribune Co. and Washington Post Co.

    The third big newspaper classified consortium is CareerPath of Los Angeles; its investors include Cox Interactive Media, Gannett, Hearst, Knight Ridder, New York Times, Times Mirror, Tribune and Washington Post. So some of the owners of Classified Ventures and some of the owners of AdOne own some of CareerPath. And there are investors in both CareerPath and AdOne that have no ownership stake in Classified Ventures.

    Interestingly, all the players in the ill-fated New Century Network newspaper on-line consortium participate in one or two of these three consortia (nobody is in all three).

  • Though denied by the players, it's clear that AdOne seeks to represent second-tier newspapers (though most AdOne owners have first-tier properties). With the industry focus on the big players like Tribune and Times Mirror, it's great that there will be an outlet for aggregated classifieds from the smaller players.

  • Why do it? The official representatives of the new AdOne owners talked a lot about "protecting the franchise," but the real reason was probably one of venture capitalistic cold feet. AdOne had been boot-strapped by the founders with "angel" funds (those from friends and family), but the company quickly caught the eye of Silicon Alley venture capitalists.

    An infusion of cash booted out one founder and brought in professional management; after a second round of funding, the second CEO was out the door. Though the "burn rate" (the amount of money a company loses every week) has been lowered, AdOne still isn't making money. And even in these heady days of Internet-related IPOs, obviously nobody thought AdOne would fly on Wall Street.

    Clearly, AdOne means more to newspapers than it did to investors outside the business. The papers had to pony up to keep AdOne alive.

  • It is now finally clear that newspapers (or, at least the partners in AdOne) understand the issue of competition in the world of the World-Wide Web. With bitter rivals Denver Post (MediaNews) and Denver Rocky Mountain News (Scripps) both likely to post ads on AdOne (details to be worked out later), the companies appear to understand that in print, competition is geographic, while on-line, competition is – well, basically, everyone and everywhere. The Silicon Valley theory that everyone is a competitor and a potential ally seems to have come to the newspaper business.

    Have newspapers lost the on-line classified market? That's a tough question to answer. I just performed a little experiment, looking for a home similar to mine in my neighborhood. I checked SFGate.com (the site of the San Francisco Chronicle and Examiner), AdOne (whose representation in this market is handled by MediaNews' San Mateo Times) and Yahoo's free classifieds.

    Though there was nothing to match my request in either of the print-based classified sources (and their user interfaces were rather arcane), Yahoo offered me the perfect prospective home with a minimum of keystrokes.

    Of course, the place didn't take pets – but then, maybe all of our horses have left the building.

    – David M. Cole

    Inside ...

    From NEWSINC., Feb. 1, 1999, Copyright © 1999, The Cole Group. All Rights Reserved.

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