At most newspapers, the online classified ad is an upsell from the print ad. First the sales rep takes an ad for a Sunday, three-day or seven-day run in the paper, and then she adds, “And your ad will also appear online.”

Disregarding for the moment that that’s the wrong way to sell online ads, the notion of the Web ad being an upsell from the print classified is ending.

Although I’ve said it for years in presentations and workshops, now that dose of reality comes courtesy of the Newspaper Association of America.

“We’re telling publishers: ‘You must plan for a next-generation classified product in which the paper is an upsell from the online product,” Ralph Terkowitz, chief technical officer of The Washington Post Co. told me. “You don’t want to discover that someone else has entered your market with comprehensive capabilities and then start to catch up.”

The NAA comments came in a recent report from its horizon-watching committee. The report, which is available online at naa.org/horizon, warns that publishers have been complacent.

“While newspapers are still significant players, they are no longer the only — or always the most effective — game in town,” the report states. It calls the current model of accepting ads by telephone “inherently flawed” because it does not create an effective database of information from which to sell products and services.

The report continues, “While newspapers have ramped up their online offerings, the fear of cannibalization and adherence to a print-centric means of ad collection and publishing have limited their abilities to maximize revenue and compete effectively against these new entrants. To assure survival this must change. ... As traditional barriers have disappeared, newspapers’ position as the primary conduit to consumers is at risk.”

Those are pretty bleak, candid admissions for a newspaper trade association.

The NAA and its committee deserve to be congratulated for taking such an honest approach. Even the name of the report, “Classified Evolution: A Web-centric solution to a shifting marketplace,” makes clear that the old way of doing business probably won’t survive.

The report offers a roadmap of improvements that newspapers must make to remain in the classified advertising business:

• Developing a sophisticated database of information about the products and services being offered.

• Enhancing the information about those products so that online users can gather much more detail.

• Automating the ad sales process so advertisers can place their own ads online.

• Offering audience segmentation, because the users of various products differ demographically and have discrete needs and usage patterns.

• Enabling immediate transactions. The report notes that eBay and many online sites allow users to “buy it now,” something that’s impossible with a print ad. If newspaper ads are all about enabling and promoting commerce, they’ll have to offer “buy it now” services to compete in the new marketplace.

• Making multiple media — such as audio, video and “virtual tours” — available online. Again, newspaper competitors do it; if newspapers don’t, they’ll be left behind.

Kjell Aamot, the chief executive officer of international media group Schibsted, predicted at a recent major media conference in Norway that all classified ads would move out of newspapers within 10 years. He said customers now contact Schibsted’s classified ad online portal, Finn.no, to buy an ad and “We then try to convince them into buying an upgrade for the paper version. It used to be the other way around.”

For the last few years, we’ve predicted that as an eventuality. Now, obviously, the “eventual” has arrived.

(By the way, we noted at the beginning of this column that selling a print ad and then offering an online upsell is the wrong way to do business. In a future column, we’ll review the best approach.)

Unless you see classified ads as unimportant to your future, here are a few steps you should take to make sure you retain them as key revenue sources:

• Download the NAA report

• Embark on a process of continuous improvement of your classifieds, one vertical and one product at a time. Make sure you have the best employment, automotive, real estate and merchandise classifieds in your marketplace and keep making them better.

• Add features. Make it easier to buy online ads, improve your online sales interface and enrich the database with external information like local content and interactive tools.

Finally, focus on your marketplace, rather than your newspaper. If you’re doing the best job serving your audience and advertisers, you’ll win. If not, you’ll lose — and sadly, deserve to lose.

Peter M. Zollman is founding principal of the Classified Intelligence LLC and the AIM Group — consulting groups that work with media companies to help develop profitable interactive media services. The Classified Intelligence 2003 Employment Annual is now available through the firms’ Web site, www.classifiedintelligence.com. Readers can also download for free Zollman’s “Selling Print Classifieds Online” report. Zollman can be reached at pzollman@aimgroup.com, 407.788.2780.