Wednesday, May 18, 2005

Recycler's freebie plan doesn't ad up

The Tribune Co. deserves credit for being the first major newspaper publisher to grasp the concept that free online classified advertising is here to stay, but its response is strangely sub-optimal.

As all publishers should be, Tribune is worried about predictions that 8.6% of highly profitable newspaper revenues could vanish within two years as $4 billion in classified-ad revenues flow to eBay, Monster and free online sites like Craig’s List.

To combat the (mostly) free classifieds on Craig’s List, the most potent and disruptive of the challengers, Tribune plans to recycle Craig’s concept by launching in 12 cities a free classified site called Recycler.Com.

While not stunningly innovative, the launch is a forthright response to the reality that a growing number of people (especially them pesky young’uns) think “web,” not “newspaper,” when they want to sell a car, need to rent an apartment or got to have somebody to love. Courtesy of Craig, most people have come to realize they don’t have to pay for these ads, either. Hence, the threat to the more than $15 billion in classified ads sold annually by U.S. daily newspapers.

Tribune evidently was so fired up to fight free with free that it flat forgot to connect the dots that could make Recycler a far more potent strategic initiative than it appears destined to be. More on that in a moment. First, here’s the background:

Recycler, a Los Angeles institution acquired by Tribune when it bought Times Mirror in 2000, got its start 30 years ago as a free want-ad tabloid in Los Angeles. Recycler wisely set up shop on the web when such things became fashionable several years ago.

L.A.’s Recycler gives private parties free ads on both the web and in its print publication, but it charges commercial accounts a modest $8 for a basic listing. Recycler pushes a number of upsell opportunities to both individual and commercial advertisers entering listings at its website. The upsells include more text, more pictures, longer running time for the ads, and the ability to buy and sell online. This is a pretty good concept that claims to have “over 100,000 new listings” and 900,000 readers each week.

So far, so good.

In deciding to create a free online classified site in a dozen other towns, including all those where it operates the dominant newspaper, Tribune is launching the website, but inexplicably is skipping for the time being the print product that made the original Recycler a success. The Tribune’s plan is to “monitor user feedback and activity in each market to determine if there's a demand for additional print publications,” according Christine Hennessey, its public relations manager.

In the absence of the print product, it is unclear how potential users will know about the new website, because Tribune evidently is not clear on how it will promote the new service. Although the company could pitch the site at the TV stations and/or newspapers it owns in the each of the cities where Recycler is being launched, Tribune says only that it plans on “doing different things in different markets over the next few months.”

It's understandable if Tribune wants an element of surprise in its rollout plan. Let's just hope the product managers are in on the secret.

If you stipulate for the sake of argument that people indeed will find the website and start placing free ads on it, then Recycler’s success would seem to come at the expense of the paid classified business in Tribune’s own newspapers.

Unless, of course, the company had an aggressive plan to encourage Recycler advertisers to also buy ads in the incumbent papers. But, amazingly, Tribune doesn’t. “Tribune's focus is on gaining a critical mass of online listings and will evaluate print-ad demand and options in the future,” says Christine.

In the absence of a revenue-recapture plan, it looks like Recycler is poised to hasten, not arrest, the flow of paid classified ads to free online venues. So, we are left wondering:

:: How does Tribune think it is defending – or growing – its business by investing in an expensive project that further conditions consumers to expect free classified services?

:: Does Tribune really think advertisers will start buying Recycler ads if it decides to turn on the meter in three years? Won’t people just take their “free” business to Craig?

:: Does Tribune really think it can spend into oblivion the comfortably profitable Craig’s List, which started with almost no capital, doesn’t owe anybody any money and operates with a staff of just 18 people?

Recycler has the potential to be either a bold strategic stroke or a sorry strikeout. At the moment, the count is about 0-1½.

2 Comments:

Blogger brian said...

what tribune should do, instead of trying to out craig craigslist, is team up with another publisher like Gannett and build a competitor to eBay. I am sure many power sellers on eBay who have grumbled about their ever rising fees will quickly flee to another entity if it is competently done.

11:03 PM  
Anonymous Leslie said...

You'd think newspaper would learn. They started out online (most of them) by giving away all their content for free, and NOW that everyone is conditioned to think that news online for free is a god-given right, newspapers are trying to figure out how to start charging for it.

Whether or not free classifieds online are a good idea, the plan to run them free and THEN hope to charge for them is not going to work.

12:55 PM  

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