Magazine article Editor & Publisher

Will Classified Advertising Come Back? the Internet and the Economy Dealt a Double Blow to Newspaper Revenues

Magazine article Editor & Publisher

Will Classified Advertising Come Back? the Internet and the Economy Dealt a Double Blow to Newspaper Revenues

Article excerpt

NOWHERE ELSE HAVE NEWSPAPERS SUFFERED AS mightily in the last five years as in the meltdown in classified advertising, where nearly $14 billion in highly profitable revenue was vaporized between 2005 and 2010.

The classified ad crash, of course, resulted from the worst global economic calamity since the 1930s. The real estate market collapsed. Employers stopped hiring. Two of the three domestic automakers plunged into bankruptcy.

The impact on newspapers was rapid and profound:

While classified advertising delivered more than 40 percent of newspaper revenues as recently as 2000, want ads produced barely 22 percent of the industry's revenues by the end of 2010--the lowest contribution in 50 years. To put it another way, the classified crash was responsible for 58 percent of the drop in revenues that brought total newspaper ad sales to some $26 billion at the end of 2010 from an all-time high of $49.4 billion in 2005.

Now that the economy is--sort of--on the mend, the big question for publishers is how much the classified advertising market will rebound. Although economic upswings historically have reinvigorated classified advertising, this time may be different.

The principal reasons that classifieds may never regain their former strength are that people are hunting for jobs, buying cars, and shopping for homes in decidedly different ways today than they did even five years ago. They have moved to the Web. And employers, car dealers, and real estate agents are enthusiastically following them.

The classified collapse, which began with a trickle in 2006, turned into a torrent as the economy unraveled and continued declining in 2010 despite the nascent recovery. Here is where we are today:

Total recruitment advertising revenue at American newspapers was about $750 million last year, or 85 percent of the $5.1 billion produced by this vertical in 2005.

Real estate sales were approximately $1.1 billion at the end of 2010, or 76 percent lower than the $4.6 billion achieved in 2005.

Automotive revenues were about $1.2 billion last year, or 73 percent of the nearly $4.6 billion booked in 2005.

The above projections are based on data published through the first nine months of 2010 by the Newspaper Association of America; the projections for the final three months of last year are mine.

To be sure, classified advertising is likely to improve if the economy continues to recover. Employment advertising, for example, advanced 5 percent in the third quarter of 2010 over the prior year's level. But, as discussed previously, recruitment advertising remains deeply depressed.

Fundamental shifts in consumer and advertiser behavior in each of these major verticals suggest that they never will return to their former glory. …

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