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Classified
ad pricing may fall
to
near zero, experts say
By Peter Zollman
Are
you preparing for the day when the price of a classified ad in your newspaper
falls to pennies, or nothing? Gannett and Knight Ridder are. They know they need
to reinvent classifieds.
The
No. 1 and No. 2 newspaper groups in the United States, respectively, Gannett and
KR foresee pricing pressure on classified ads like never before. They’re
preparing for radical changes in classified ad business models - including major
changes in sales strategies, and “participation in the transaction” to
capture revenue that’s disappeared from the classified pages.
Mindful
of the impact Craigslist, eBay, social networks and declining print readership
are having on traditional classifieds, Mike Kment, Gannett’s corporate
classified advertising director, and Tom Mohr, KR’s former corporate
classified vice president, recently spoke to newspaper classified ad directors.
(Mohr is now president of Knight Ridder Digital.)
They
didn’t pull punches.
“I
sometimes don’t think we have fully come to terms with the degree to which we
need to undergo transformational change in order to be in a defensible position
for the next five to 20 years,” Mohr said. “As an industry, we have in some
ways, let me be tough, failed miserably, in the ways we have responded to the
competitive threats we face. I see the need for very aggressive, very
significant, transformational change. And I see that beginning to happen.”
Apartment
ads gone?
Mohr
said newspapers have almost lost all advertising for apartments, although “I
think it can return.” And “we have now virtually lost the merchandise
private-party category, or at least it’s in serious jeopardy.”
There’s
“increasing online risk in real estate and automotive, where you have the
emergence of pay-for-performance models,” he said, and newspapers have had to
fight “a tremendous battle for recruitment (advertising)” as well.
Kment
painted an equally bleak picture of private-party advertising - the “liners”
that are the core of the classified section - and commercial merchandise
advertising.
“I
think the price point for both private-party and commercial customers, relative
to ... bringing buyers and sellers together, is just slightly north of zero,”
he said.
“The
great advantage that we have going forward is the proximity to the
transaction,” Kment said. “We are by definition local, local, local. How do
we bring (together) people who will benefit from being proximate to the timing
of the transaction ... and how can we monetize that? Because at some point
we’re not going to be able to do what we’ve always done... kind of put our
finger up in the air and guess how much more can we charge, because what we can
charge is going to go rapidly down and it’s going to go greatly down.”
Kment
said newspapers have to earn transactional revenue. He mentioned a major city
where Craigslist carried 12 ads for used pool tables while the metro daily and
its Web site had none. What happens, he asked, if the newspaper offers those ads
for free to recapture the marketplace, but then earns revenue in several steps
along the way - for example, payments from companies that move the pool tables,
and/or from people who replace the felt on pool tables?
Not
selling but being bought
Mohr
said right now, most classifieds are bought rather than being sold.
“I
don’t think we have come to terms with the degree to which we need to change
as sales organizations. I have talked about it as the shift from being a
catcher’s mitt to a pitching machine, he said. “We have got to make a
fundamental shift that increases the sales pressure in our market, not by 5 or
10 percent, but by 500 percent, or more.”
Competitors
have found it easy to take away newspapers’ business.
“Frankly,
in most cases, we just let ‘em do it,” Mohr said.
Kment
later told me he thinks the price collapse will affect mainly private-party and
small-business advertisers.
He
does not have the same pricing or relative-value concerns about display
advertisers - particularly classified display advertising that features both
branding and inventory.
“I’m
very optimistic,” he said. “I think the fact that newspapers... have
developed multiple platforms and strong local classified advertising markets,
should give us all confidence that our foundation of ‘local’ and the trust
implicit with our local newspaper brands is a tremendous comparative advantage
relative to our competition.”
At
the meeting, Kment said publishers and classified ad directors are somewhat
conflicted by the need for change.
“We
all know we’ve come a long way in the last few years, and it’s become ever
more clear that we’ve got a long way to go,” he said. “We’re not even
sure where that ‘is’ is that we’ve got to go.”
Whatever
that “is” is, it clearly doesn’t include just doing things the way
they’ve always been done. As Kment put it: “If we can be the ones to
reinvent the business model and reinvent classifieds across our platforms (so
they) may last another 50 years, or at least another few years, then we really
will have done something. If [we are only] present at the wind-down of what
somebody else built a long time ago, that would be sad.
“My
challenge to you is... to really think about the responsibility we have to
reinvent this business.”
Amen
to that.
Peter
M. Zollman is founding principal of the AIM Group and Classified Intelligence
LLC, consulting groups that work with media companies to help develop profitable
interactive media services. He can be reached at 407.788.2780 or via e-mail at pzollman@aimgroup.com.
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