Competitive Intelligence

Newspapers Struggle to Compete with Craigslist

When EBay bought 25 percent of Craigslist in mid-2004, founded years earlier by social activist, Craig Newmark, it represented the creation of a more well-funded threat by a largely free, nimble competitor to traditional classified media in the newspaper business. Now, a new report says Craigslist is costing Bay Area newspapers between $50 million and $65 million in classified revenue a year:

Online classifieds site Craigslist costs the Bay Area's traditional newspapers, and their online divisions, between $50 and $65 million annually in revenues from employment ads alone, according to a report by Bob Cauthorn, former digital media VP at SFGate.com, the site for the San Francisco Chronicle.

Cauthorn put together the report, part of a package called "Competing with Craig," for research group Classified Intelligence. While Cauthorn didn't reveal the details of his methodology, he said he estimates the average recruitment ad in a metro daily would be worth $700. Craigslist charges $75.

"Craig is pulling out of this market alone somewhere north of $7 million to $8 million dollars, and probably closer to $10," said Cauthorn. "That's for recruitment alone."

In the report, Cauthorn says Bay Area newspaper executives can only blame themselves for losing their leadership position, "because they took no action and listened instead to the arguments inspired by fear, lack of vision, and short-sighted greed."

According to the study, Craigslist had 12,200 active job listings on its San Francisco site the week of November 21, 2004. In contrast, the San Francisco Chronicle had 1,500; the Oakland Tribune had 734; the San Jose Mercury News had an estimated 1,700; and the Contra Costa Times had around 1,000.

Cauthorn suggests that to compete with Craigslist, newspapers should begin offering free online classifieds, and promote the offer in their print publications. They should also offer easy, self-service tools to let users post ads online, and include anonymous Craigslist-style e-mail aliases.

One advantage newspapers have, the study says, is businesses find it easier to work with them than with Craigslist. Cauthorn also points to Craigslist's customer support structure as an area of weakness.

"It's not a fatal flaw, and Craigslist will certainly work it out," Cauthorn writes. "But this problem, and Craigslist's weakness in dealing with institutional customers, provide enough of a gap for other smart publishers to flood the gap while Craigslist sorts itself out."

In another section of the package, 23-year-old Craigslist user Avi Zollman also offers suggestions for traditional newspapers' online divisions: provide RSS feeds of listings, post ads immediately, and let users have all the space they need, including for photos.

"Obviously they have to reach a younger audience, whether it's going to be in the newspaper or in RSS feeds sent to wireless devices with new forms of classified ads," said Peter Zollman, founding principal of Classified Intelligence and father of Craigslist user Avi. "The short answer is that it's going to have to be all of those if they want to stay in the business."

So, the message to the newspapers is, adapt or die. Craig Newmark is bringing his list to your town and he's gonna steal your lunch money.

- Arik

Posted by Arik Johnson at January 4, 2005 01:38 PM | TrackBack