August 14, 2013 Last Updated 11:48 am

Newspapers and the Rust Belt of the publishing business

Every time I read something from a newspaper analyst, or a tweet from a journalist, or academic talking about newspapers and anything to do with advertising, I get angry. I mean really angry. Angry for a week. It seems that reporters talk to reporters who talk to analysts, and out comes some crazy opinion about the ad business – and never is an ad director or classified manager ever consulted or quoted. Getting a J degree, apparently, is all that is necessary to know everything there is about newspaper advertising, who knew?

Today’s high priests of the newspaper business are like any other preacher – they believe that you have to die first before you can go to heaven. So they are working overtime to make sure that happens.

Classified-section-smLike any religion, there are some things that are to be taken on faith. One of those is that Craig’s List killed off newspaper classifieds. Newspaper publishers have been saying this for years, and now a new study from Robert Seamans, assistant professor of management and organizations at the NYU Stern School of Business, and Feng Zhu at the Harvard Business School, claims that Craig’s List took $5 billion away from the newspaper business. Well, actually it saved classified-ad buyers that amount of money (the two things are not the same, of course).

“Our study demonstrates how media companies respond to shocks from technologically disruptive entrants in different industries – an important issue as the boundaries between media industries are blurred and advertisers are able to reach relevant consumers through a variety of platforms such as TV, the Internet and mobile devices,” said Professor Seamans in the Reuters story on the study. This study provides some insights to media moguls who will face future industry shocks and are pushed to re-evaluate their business models.”

As I haven’t read the study it would be foolish to comment on it. But as the study looked at 2000 through 2007 I can immediately tell you that I wonder if the researchers missed a huge portion of the story of newspapers and classifieds. But like anything that reinforces an existing belief, I’m sure many media observers will be grasping hold of this as further proof of their strongly held theory.

As I’ve written before, I saw the decline of classifieds first hand in the late eighties and nineties. This was a period of tremendous growth for many newspapers and their classified departments, so why would I say “decline”?

Newspapers have always seen that damn print edition as their product. Their only real product. Period. So when auto traders and real estate tabloids emerged to challenge newspapers for classified ads newspapers generally did not respond by launching new products, but by tweaking their existing ones. Editorial was added to auto and real estate sections, for instance. We launched our own tabloid section for real estate at the Hearst paper in Los Angeles, but my idea of distributing overruns of the section outside the paper was rejected as something outside the paper’s purview.

It is in the DNA of most newspaper companies to allow the death of their sections without much of a fight. In the eighties, for example, our competitors at the L.A. Times would run an enormous food section each week. Enormous. In fact, that food section was larger back then than the entire paper is today on the same weekday. After a few years of running the advertising for that real estate section I moved over to retail and eventually found myself responsible for selling grocery advertising. Our main sales pitch was that if a grocery chain would cut back on just one of the dozen or so pages they were running in the Times and gave that money over to us they could run four pages in the Herald Examiner.

But that advertising, too, disappeared – and it didn’t go to Craig’s List. It went into circulars, inserts, in-store advertising and the like. Only later did the grocery chains start to spend money on digital solutions.

If newspapers were losing this business during the good years, why didn’t we see declines until the last decade? I’m not sure, though I suspect the answer is the economy. The nineties were a prosperous time (except for the recession at the beginning of the decade) and the rise of tech late in the decade meant recruitment advertising in papers like the San Jose Mercury News made those papers hugely profitable. Times were great, even if the Monday edition was starting to look anemic.

But newspaper advertising was already seen as ridiculously expensive by clients, especially when compared to the level of market penetration being offered. Why spend thousands of dollars on an ad in a section of the paper when for one-tenth the cost one could run an ad that was seen in a tabloid shopper or trader or that got the same results? Why reach 500,000 readers with an ad that went all over the state, but only one third of the households in a specific zip code when one could spend one-tenth the amount and reach nearly 100 percent of the homes near their business?

Before ADVO and the marriage mailers, newspapers fought against themselves, presenting their ABC audits and Scarborough reports to advertisers. But in the late eighties we started to see advertisers tell their reps that their newspapers were not reaching everyone. In response papers began to supplement their reach through different types of programs: print ads and mail, inserts and mail. These programs were not all that widespread, but where the occurred they were good reactions to the new threats posed by the marriage mail business. These efforts were rarely duplicated in other areas, however.

By the time the web arrived in force newspapers were already vulnerable. The bursting of the Internet bubble coincided with the Bush administration, 9/11, growing unemployment, war, and finally the financial crisis of 2007 that we still feel today.

If the Internet were to blame exclusively for newspaper’s problems we would be seeing web properties reporting huge gains in classified advertising (do you think Monster and CareerBuilder are livin’ la vida loca?).

Newspapers have lost their advertising because they have failed to face up the challenge of advertisers seeking cheaper vehicles that give them greater reach. Craig’s List does this, but so does Google, so does auto traders, tabloids, apartment guides, LinkedIn, Facebook, Twitter and a post card on a bulletin in the grocery store. In response newspapers have done what? Invest in Classified Ventures? That’s it?

(How many newspapers today have moved solidly into mobile with their advertising? Few. I’ve asked newspaper professionals many times this simply question: “when you organized your mobile app team and met to discuss the design and functionality you wanted in your new app was a member of the classified or retail ad departments part of the team?” I’m not sure that I’ve ever heard that an ad person was involved. Most of the time no one from the paper was involved because the app was outsourced to a third party. Even the Digital First papers outsource their digital – some commitment to digital, right?

Newspapers have lost their advertising without putting up much of a fight spurred on, a lot of time, by the paid content crowd that promises a rosy future without advertising. I always thought the proper flower for a funeral wreath was carnations, but roses will do.

cropped-Belt2It is hard to tell if the launch of a new publication, Belt Magazine, could be the result of Advance’s retreat with the Plain Dealer, but it somehow feels related. Belt says it is designed to serve Cleveland and the Rust Belt. I hate that they still call it that – the rust belt – as it seemed to me that just a few years ago the midwest appeared to have beaten that label back. Then the last decade happened.

The frustration for a former newspaper executive is that newspapers could have been the ones to lead the charge on the new digital platforms – the web first, then mobile and now tablets. One of my first blog posts talked about how a local soccer blogger in Minnesota should be recruited to write for the local paper. That paper could easily and cheaply build the websites for bloggers, create networks of writers, and curate and aggregate their reporting.

Instead, papers continue to use third party aggregation companies that eventually lead to embarrassing copy and eventually to their dismissal.

Newspapers could be the builders of their own FiveThirtyEights, their own digital magazine launches. But they are not.

If this all sounds too much like a rant, then maybe I’ve failed to make the essential point: there are things that can be done to combat declining newspaper revenue. Cutting home delivery and blaming Craig’s List seem to me to be the wrong solution. Building digital businesses seem like a better idea. But what do I know, I’m not an analyst, right?

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