Advertiser Influence | Project for Excellence in Journalism (PEJ)

March 13, 2006

Another factor in the decline of ad revenue was downturns in some industries that purchase newspaper ads. Automobile sales and auto advertising had an off year in 2005 (they did well only with the summer “employee-price” promotion). According to the January 17, 2006 , report from Deutsche Bank, auto classified was down 5% over all and down as much as the “low teens” for some publicly traded companies.7

A rally in auto advertising had been one of the hopes of the newspaper industry for a better 2006. But that hope dimmed, and newspapers posted especially bad results in December 2005, the month Ford announced its plans to restructure and lay off 30,000 workers.

Completion of the Federated-May department store merger also hurt retail advertising in a number of large cities — two significant advertisers collapsed into one, and they shifted strategy to emphasize Internet. At Philadelphia Newspapers, for instance, publisher Joe Natoli said the merger would eliminate the Strawbridge’s nameplate, one of the papers’ largest advertisers.8

The movie business was down for a second consecutive year, especially affecting the New York Times and Los Angeles Times. And the Wal-Mart phenomenon keeps on rolling. The retail juggernaut rarely runs newspaper advertising, and other big-box retailers like Home Depot and Circuit City have shifted from display advertising to inserts.

Telecommunications advertising also contracts as a result of mergers like that of Sprint and Nextel. Telecommunications newspaper advertising declined 14% in the third quarter.9

Real estate advertising was the one category that appeared especially strong in 2005. And even if the boom in housing prices had crested, as many believed, that might or might not be a negative in 2006. Longer time for sales could translate to extended advertising schedules in some markets. Still, as the Newspaper Association of America has noted, Web alternatives are gradually making newspaper listings less central to selling existing homes.

Over all, both the volume of classified advertising and what newspapers can charge for it came under pressure in 2005. Craigslist, whose online classified listings are free except for job-recruitment ads in some big cities, represents killer competition in categories like general merchandise. In San Francisco, home base of Craigslist, the service is estimated to have cost the San Francisco Chronicle $50 million in lost classified revenue in 2004.10 A number of newspapers now offer free listings to private parties trying to sell small-ticket items, but broadly the industry is stuck trying to make the case that while their classified are more costly, they deliver greater value.

If the Craigslist headache isn’t enough, Google in November 2005 launched a new product in beta (trial) version, called Google Base. It allows users to post all kinds of content, including free classified advertising. It is too early to estimate its competitive impact, but that could prove enormous.

Employment advertising is another microcosm of the competitive dilemma in what traditionally has been the single highest-margin segment of the high-margin classifieds. Recruitment advertising was up for the year, but some of the huge losses of 2001 have never been recouped.

Online sites like Monster.com, which was set up for both job suppliers and job seekers, have taken a big bite out of newspapers’ share. The newspaper’ own electronic service, CareerBuilder, a joint venture of Gannett, Tribune and Knight-Ridder, has grown quickly in five years and is now the industry leader in volume (whether it is truly profitable is still murky). The fact remains, though, that Monster, which did not exist a decade ago, was recording 200 million job searches a month and approaching $1 billion in annual revenues worldwide in 2005.11 Yahoo/Hot Jobs, third in the field, is a formidable competitor, too.