When a Competitor Gives Away What You Are Selling
Will Craig Newmark Destroy the Newspaper Business?
Dec 1, 2005: Vol. 1, Issue No 52
IN THE NEWS
Entrepreneur taps mistrust of media for new venture
The internet entrepreneur Craig Newmark, whose Craigslist site provided a hugely successful free alternative to classified advertising, has trained his sights on the old-fashioned newspaper industry. Mr. Newmark--whose craigslist.org is the seventh-most visited internet site in America, just after eBay--has diverted millions of dollars of advertising revenue away from newspapers.
-- David Usborne, The Independent, Nov. 23, 2005
Craig Newmark comes off sounding like a benign, lovely guy. The 52-year-old proprietor of craigslist.com (craigslist.org) told interviewer Nathan C. Kaiser in 2004:
We are a very simple site where people can address everyday needs such as finding a place to live, a job, selling their stuff, to find a date. We are not about fancy stuff and instead focus on everyday life.
And in his story for Wired, "Mr. Craigslist, Master of the Nerdiverse," Josh McHugh asked him what was Craiglist's greatest contribution to society. His reply:
Just by being good guys, we've created a culture of trust and fairness. The site makes it easier for people to get everyday stuff done, like selling things and finding an apartment. Then there's another aspect--it has helped people who have a hard time meeting other people. They're using the site and becoming friends, lovers, and every possible twist on those two situations.
Early in 1995, Newmark started craigslist.com in San Francisco as an online bulletin board where people could list cool events, sell things, meet each other, find apartments, get child care, and have discussions about everything from films and fitness to food and pets.
By word of mouth, craigslist.com has grown to be the seventh largest Internet site (after eBay), with 8 million people generating 2 billion page views per month. Five million classified ads and 1 million forums are posted every month.
This extraordinary operation is accomplished by just 18 folks working out of a Victorian house in the Inner Sunset neighborhood of San Francisco.
For years, craigslist.com was run by Newmark as a hobby and staffed with volunteers. Feeling the need to pay bills, he started charging for job postings in the San Francisco Bay area where the cost is $75 for 30 days. In New York and Los Angeles, job postings are $25.
Everywhere else it's free.
Paid circulation and classified advertising are the financial guts of the newspaper business. Professor Philip Meyer, author of "The Vanishing Newspaper: Saving Journalism in the Information Age," claims that classified advertising represents 40 percent of U.S. newspapers' revenue.
It has been estimated that craigslist.com is costing San Francisco area newspapers $50 million a year in lost classified advertising.
Extend those kinds of losses across Craiglist's 120 American cities and 25 countries, and pretty soon you're talking real money.
What do you do if your competitor starts giving away the thing that you're selling?
A Monday Morning Surprise
Affixed to the top of the front page of The Philadelphia Inquirer was this attention-getting sticker.
Let me say at the outset, I have an abiding fascination for classified advertising--especially job postings. After I got out of the Army in 1960, I had nine jobs in 12 years. I used help-wanted ads a lot.
Looking for a job is a trying experience. People need work. Cash is running short. Rent must be paid and bills are coming due. It's terrible to be interviewed and then turned down. It's worse to find no jobs in your field.
As an old job hopper, I believe a newspaper's classified section should be comprehensive, inviting and easy-to-navigate.
When I saw this little sticker I immediately went to the help-wanted section of the Inquirer, tried to put myself inside my head 45 years ago and imagine I was looking for a job. The section was a horror--a hysterical hodgepodge of type sizes and styles. Job titles were more or less in alphabetical order, but some were tiny while others were huge. Italics, boldface, tiny black strips with white type reversed out--the whole thing was a nightmare.
When I got to the office, I immediately went to www.philly.com/clasifieds and it was an absolute joy--a Web site managed by CareerBuilder.com with jobs all over the country.
Click on the "Jobs" category, enter a keyword (e.g., marketing), enter a city and state (Philadelphia, PA), and up pops brief descriptions of jobs.
The first job under "Marketing" was:
Marketing Coordinator/Editor - Marketing Communications, Hospital of the University of Pennsylvania. Job posted 11/25. … career of a lifetime. The Marketing Coordinator/Editor will work … conceptualize, implement and evaluate marketing initiatives for …
Click on the link and you get a complete description of the company, the position, the duties, and required education and experience--just about everything needed to make a go/no-go decision.
I thought back 45 years to when I would circle the tiny help wanted ads that seemed like possibilities and call for an appointment, having no real idea of the job, the company or the pay.
Until this past Monday, I honestly believed that no new medium ever put an old medium out of business, with the exception of voice transmission putting Morse code out to pasture.
Otherwise, radio did not kill newspapers; television did not put radio out of business; and all three have thrived over the short life of the Internet.
Gordon Borrell, of Virginia-based Borrell Associates, said, "Seldom has a new medium come along and killed another. But ... the Internet is squeezing newspaper into a niche product. Classified is being walloped."
I believe it.
It will not happen all at once. Newspapers are still profitable. But over the coming years, you will see a life-and-death struggle as geezers like me die off and the BlackBerry bunch achieves primacy.
I went to look for a marketing job in Philadelphia on craigslist.com, clicked "marketing/pr/ad" and got a polyglot collection of one-liners:
QUICK EASY MONEY (Phila)
On-Site Marketing Specialist - Entry Level (East Norriton)
Play! Play! Play!
B2B Sales and Sales Management (Phila/Plymouth Meeting)
Click on any of these and you get a full description of the job. But you have to wonder what serious person would look for a job in this "nerdiverse."
A job posting on Craig's list is free for 30 days.
Spend $475 and you can get up to 10 lines of description for two days in The Inquirer and its sassy little sibling, The Daily News, plus 30-days' exposure on CareerBuilder.com with up to 500 characters of description.
I am convinced paying money and going the CareerBuilder.com route will bring in far higher quality candidates, thus saving the advertiser time and, ultimately, money.
Sales and Marketing Strategies & News e-zine states that "Hiring the wrong person costs you three times their annual salary."
Ultimately, you get what you pay for.
The San Diego Union-Tribune's Unique Solution
All over the country, newspapers and conglomerates are reporting classified advertising is down. Among them: Knight Ridder, which yesterday implemented a spending freeze across its 32 papers pending a sale (-7.1%); The McClatchy Co. (-7%); and the Tribune Company (-9%).
According to Joe Fine in AdAge.com, if trends continue, newspapers will lose $4 billion in classified advertising by 2007.
In point of fact, classified ads represent "content." People buy newspapers as much for the classifieds as they do for news and features. Fewer classifieds mean fewer readers and a diminishing rate base, which, in turn, is reflected in lower advertising revenues.
Beginning last August, the Union-Tribune started offering free ads--three lines in its classified section and Web site--to any individual wanting to sell automobiles or other merchandise worth $5,000 or less. Commercial advertisers need not apply.
Google Further Muddies the Waters
On Nov. 15 came the announcement of the new Google Base service that will allow people to upload just about anything they want at no cost, and their messages will be searchable on Google Search, Google Local and Froogle.
A Google spokesman told Eleanor Mills of news.com that much of the information in Google Base is expected to be non-commercial, and denied it was going into the classified business.
Go to base.google.com and you will find automobiles for sale, home rentals and sales, computer equipment, businesses offering their services, and an online mall.
Google Base is very much in the classified business.
And it's all free.
Takeaway Points to Consider
- Who are your competitors? What can they do to put you out of business? Do you have plans in place that will enable you to survive and prosper?
- What can you do to put your competitors out of business--or at least increase your market share?
- Are your products and services absolutely leading edge? Or are you in the legacy business--such as the Inquirer print job postings--that may be profitable now, but about to be eclipsed by new technology and marketing innovations?
- If so, should you invest in bringing them up to state-of-the-art? If you don't, a competitor will.
- Always remember General Motors. It greedily bet its future on gas-guzzling trucks and SUVs without contingency plans in case of a huge run-up in oil prices. Of the sales price of every car it sells, $1,500 goes to pay for employee and retiree health care, and it is forced to give huge rebates in order to move merchandise off the lots. GM, mired in an impossible business model, announced this past week the cutting of 30,000 jobs and closing of 12 facilities in order to stave off bankruptcy, which may be in its future.
Web sites Related to Today's Edition
Career Builders Help Wanted
Updates on Prior Issues
"A Superstar Crashes and Burns," (Nov. 17, 2005)
Buzz in the media is that Judy Miller's severance package from The New York Times after 28 years put it almost certainly in seven figures and perhaps as high as $3 million.
"Crowe Eats Crow," (June 4, 2005)
Russell Crowe, who was staying in a $3,000-a-night suite in a trendy Manhattan hotel, hurled a broken phone at the night clerk, injuring him slightly. On Nov. 19, he copped a plea to a misdemeanor assault charge which means no jail and no probation. Crowe reportedly settled "in the low six figures" with Nestor Estrada, the injured employee.