Monday, June 15, 2009

What local newspapers should do #4

This is the fourth in a series of 10 posts on what local newspapers should do to survive and thrive in the face of the economic meltdown and the societal shift to the Internet.

4. Make the classifieds a separate, standalone business. Instead of trying to beat Craigslist from within a newspaper operation, free the people running classifieds to do what’s best for that business or hire new people to take the business in a different direction. (I owe this opinion to a seasoned newspaper advertising executive who encouraged me to consider this approach.) Give the new company the existing revenue stream and technological base and the authority to set their own course. If they want to buy pages in the newspaper for print ads, fine. If not, fine. Remove any contribution from classifieds from the newspaper’s budget. Don’t include any projections of a contribution from classifieds. What this will do is free the people running classifieds to stop thinking of them from a newspaper perspective and start thinking of them from a customer perspective. Their role going forward: Connect buyers and sellers. If a newspaper or some other print products work in specialty categories, fine. If not, that would also be fine. The managers would not need to use print unless it made sense. If they can’t make the business successful, it dies. This would also free the rest of the newspaper from waiting for the return of classified revenue in key categories. It will make it clear to everybody left at the newspaper that they have to find new sources of revenue, that they can’t live on the hope that what once worked will come back and save them.

Here are some concrete steps:
• Create a new company with the mission of connecting buyers and sellers. Do not burden the new management with the existing staff. Let them hire the team to achieve their goals.
• Reset the revenue budget of the newspaper to determine the expenses it can support under the new business structure.
• Establish a team to find new sources of revenue not tied to existing classified categories

Next: Make the local newspaper a transactional site.
 Previous: Realign the internal operations of local newspaper companies to make marketing, advertising and editorial partners every step of the way.
Posted by at 2:32 AM
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4 comments:

  1. John,

    1. There is NO printed classifieds business except milking the money from the 3 retards who still think people look at them.

    2. The goal should be: create something better than CraigsList. Better=
    a. prettier
    b. easier to create a good ad
    c. easier to search
    d. free (You have to do free (in the beginning) because CraigsList is "good enough").

    3. Be prepared to dump advertising money into attracting people because CL owns the first mover position.

    4. I am well aware that #2 and #3 are at complete odds with each other. Yes, they are. Someone needs to understand that they will give away the service while spending ad money and that BUSINESS WILL BE A LOSER. Until CraigsList is dead.
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  2. Thanks, Dave. Not sure that it's reasonable to think that goal should be to kill Craigslist. But it does seem like there should be room for competing services. I just don't see how you get there if you're hung up on maintaining existing newspaper franchise, which is rapidly shrinking. On that, I think we both agree.
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  3. One thing that's missing in the classified discussion is just how enormously difficult to create a successful net business (even with momentum from another successful net business).

    Ebay's been trying to get traction against craigslist (their own ownership of 25% of craigslist not withstanding) with kijiji for years.

    The papers do have an advantage of an existing business in classifieds, the ability to promote through their papers, cross-list etc. But the first two at some level are only cheap advertising and they'll still need to charge something for the product where craigslist is free. (the free listings are their advertising and they have a ton of recurring inventory). In the areas which aren't free, jobs and rentals in new york, there's folks like monster.com and careerbuilder.com to contend with. They too have been at it for years, spending hundreds of millions in the process and they started when it was a greenfield.

    The question is, if a paper didn't own a classifieds business, would taking a run at a classifieds business still make sense?

    If yes, from a capital allocation point of view, it would probably make more sense for a 100 locals to take that money and invest in a single entity (as has been suggested and tried in various flavors) than say put 5 employees each against the endeavor. Craigslist runs on tens of employees because that is the natural cost structure for the (nation) business of general (free) classifieds. For a monster.com model (the premium model of classifieds), look at the customer acquisition costs in the early days and even now. Could a local paper find that much capital to invest to be successful? because it would take that much funding to make it reasonable go.

    It may simply be too late. Craigslist's local listings outside of SF/NY have taken years and year to build, one city at a time. Monster and careerbuilder too. (against the papers, no less)! The majority of the customers are folks who don't read the paper. And for acquiring those customers, the paper hold no special advantage. If anything, for the purposes of raising capital, the newspaper is actually at a disadvantage to a 25 year old with a powerpoint and no business at all! (again, another reason to take #4 to a logical extreme and use the capital to spin it out an entirely separate entity. the increase risk premium from the pure paper side of the business hampers success. which at some level runs against the goal of saving the "paper").

    #4 is progress though.
    ReplyDelete
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    ReplyDelete

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