Don't blame free classifieds for newspaper ills, says Craigslist chief

From the bare headline facts, it's hard to fathom how Craigslist has earned its reputation as the nemesis of the newspaper industry. Employing just 22 people, and with a 2005 turnover estimated at $30m, this is the outfit that Alan Rusbridger has said "threatens to wipe out newspapers around the world" and Goldman Sachs described as a "real menace" to the industry.

It has become the internet start-up that every newspaper executive loves to hate, thanks to its ethos of giving away the classified advertising that traditional newspapers rely on for significant parts of their revenue.

Yet as far as chief executive Jim Buckmaster is concerned, its newspaper-killing image is hard to fathom, because it simply isn't true.

The truth, he says, is that Craigslist makes a convenient scapegoat for a decline that was already well entrenched. "In our view, that story has been grossly overstated. Over here [in the US] the newspaper industry is still twice as profitable as the average industry, so when we hear stories that Craigslist or the internet is killing papers, it seems a little silly."

For the real reason, he says, we should look at the stock market's lust for ever-greater profits. "It is true that for a variety of reasons it's become harder in recent years for newspapers to increase their profitability — their already considerable profitability — and so Wall Street has pressured them to cut costs by laying off people, or if they don't have the stomach for it, they sell to a big chain that will lay off a bunch of people to try to increase profitability.

"In our minds, that's really what's going on, but it doesn't sound too good to explain it that way, so it's easier to point a finger to some external boogie man and I think we've been scapegoated that way a little bit. But we're not really prepared to take the blame.

In the US, circulations have been declining since the ‘70s. I don't think that can really be pinned on us."

Nonetheless, there are other figures that make for sobering reading. Craigslist is the seventh biggest internet company, measured by traffic, in the world.

All other nine companies in the top 10, as Buckmaster languidly points out, employ a minimum of 5,000 people.

Yet more than eight million classified ads and 300,000 jobs are posted on its websites each month.

The biggest, New York, currently advertises 135,000 items in its "housing" section alone. The only items it charges anything for are certain job advertisements in just three of its US cities. That's because its founder, Craig Newmark, has described the company's ethos as largely "philanthropic" — offering a public service rather than existing to make the vast profits that could be on tap if it charged more of its advertisers.

In the UK, Craigslist has a presence in 13 cities, the first of which, London, was launched in 2003 and now attracts eight million page views per month.

The other dozen UK city sites attract five million monthly page views between them, and the overall UK traffic is doubling every 12 months.

Are they happy with progress over here? "Yeah, I think so," says Buckmaster. "They're not growing as rapidly as some of our US cities did, but let's face it, we're not as well known in the UK as we are in the US, so it takes a little longer."

Not that there will be any marketing push to raise awareness — "it's strictly word of mouth" — or any sort of competitive analysis.

Yet despite Buckmaster's protestations, there must be some reason that an industry newsletter claimed that the Craigslist effect was burning a $50m hole in traditional print revenues in the San Francisco area alone.

"Certainly you have to be realistic about the trends," he says. "The internet is a fantastic medium for classified ads. It has a lot of qualities that can't be matched by print products — the ability to get your ad in front of tons of people, to be able to edit it after the fact and take it down whenever you want, to use as many words as you want, and add pictures, the list goes on of good things.

"The incremental costs of offering the service is so low that it's viable to offer the service for free. You can't ignore that. And people are going to gravitate toward that — certainly I would, you're getting better value.

But the reality is — at least in the US, he says — that the lion's share of classified revenue is still in print. "I believe it's something like 90 per cent of it.

Print classifieds revenue is still stable, and in some places still growing — it's just not growing at the rate that it would be if the internet wasn't there.

"It's a slower transition than I would have thought, really. And over here you certainly see newspapers experimenting with free classified ads — you've seen more and more papers. They were late arrivals I would say, so they have some catching up to do."

Despite this, Buckmaster believes there are too many wrong decisions being made by US newspaper executives. "You're losing circulation and losing some revenue. To me I don't think the reaction is to fire journalists and rely ever more heavily on wire stories or putting extra ads in the paper to try to maintain revenue.

"I think they should be going the other way, to improve the product to improve the circulation of newspapers."

He believes the internet is a spectacular medium for all information businesses. He says: "I think that over the long haul, the advent of the internet is going to be a good thing for journalism."

He also thinks the phenomenon of citizen journalism should bring great benefits to the industry.

Indeed, Newmark himself is acting in an advisory role to a citizen journalism start-up — as yet unlaunched — being developed by internet commentator Jeff Jarvis.

And Buckmaster believes a key battleground will be over the content that newspapers have paid to create, and the way it is consumed on the internet.

"It seems that the search engines get the lion's share of the profit, based on newspapers' content, right? It comes up in search engines, with text ads positioned against it. Now, as you know, the big search engines are making huge profits against internet content through text ads and search ads. If the newspapers were somehow able to get some of that profit for their own content as it's displayed…"

Similarly, with news aggregators and RSS aggregators, again it's the aggregators that are deriving the advertising profits from displaying newspaper content, generally speaking.

"I don't think there's a simple answer," says Buckmaster. "But I do think it's an interesting opportunity to figure out.

"Selling text ads on your own site — that is still complex enough that the search engines dominate that business. As that becomes more of a commodity that lots of different people will be able to offer, newspapers will probably be able to take that in house if they choose to — and instead of getting a share of the revenue from ads served on their own site, they'll be able to get 100 per cent of the revenue."

"If you look at the internet and consider the position that newspapers have — extremely high brand recognition, local focus, in a trusted position based on a locality — that seems to be what all of the big internet players are driving at, wanting to be in that position themselves. I have to think there's a better way of taking advantage of that than is being done currently.

"In a way, I think that comes down to management. Over here, newspapers were in a kind of monopolistic position for decades and could do what they wanted to do. That may be a factor in them being less than nimble now in reacting to fastmoving trends."

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