Digital nabs 77% of classified sales, says study
More than three-quarters of the global classified marketplace formerly dominated by print has moved to the digital media, according to an ambitious new study from a consulting firm.
In the first known effort to produce a bottoms-up estimate of the scope of the global classified business, the Advanced Interactive Media Group said the digital media are capturing $56.8 billion of the $92.1 billion in classified revenues being generated this year. That means 77% of the dollars generated in the classified marketplace have forsaken print for web and mobile platforms.
Classified revenues include not only the fees traditionally charged to place want-ads but also banner advertising sold on free classified sites and revenue shares collected by sites like AirBNB.Com.
The shift from print to digital remarkably similar across the world, according to the study. As illustrated in the table below, the digital media this year are capturing 77% of the $31.6 billion in classified revenues in the United States. The percentages are nearly identical in three of the next four largest classified markets: China, the United Kingdom and Germany. The only outlier is Brazil, where the AIM Group says 90% of classified sales are digital. (The study is available here for $1,795.)
The migration of classified advertising away from print is a major reason why the revenues of the U.S. newspaper industry plunged from $57.4 billion in 2003 to $37.6 billion in 2013 (further details here). With nearly all publicly held newspaper publishers reporting revenue declines throughout this year, the industry’s sales are headed even lower in 2014.
To put the significance of classified advertising at newspapers in perspective, consider this: As recently as 2000, want-ads for cars, apartments, jobs, sofas and puppies produced $19.6 billion in sales for newspapers, representing 40% of their advertising revenues, according to the Newspaper Association of America. In 2013, the industry collectively sold $4.1 billion in classifieds, which came to less than 18% of its diminished ad base.
The 78.8% drop in this key revenue category for newspapers occurred because consumers and advertisers alike have embraced the convenience, targetability and efficiency of digital classified environments, which offer comprehensive, easily searchable and low- or no-price listings.
Digital publishing has enabled whole new categories of classified verticals that were unthinkable in the age of print, said Peter Zollman, the founder of AIM Group (formerly known as Classified Intelligence). In addition to specialized sites where you can hunt for homes, cars and jobs, the digital media offer marketplaces ranging from free stuff at Craigslist.Com to vacation rentals at AirBNB to a job site for anesthesiologists called GasWorks.Com.
Advertisers are particularly jazzed about the low cost of digital classified advertising, as compared with the hundreds of dollars newspapers used to charge for three lines of agate type to fill a secretarial position or hire a car salesman.
“Digital classifieds are priced much lower than the equivalent before digital,” said Zollman in an email. “And many millions of ads are posted every day for free, with sites making their money on upsells, adjacent banner ads, sales of Big Data and lots of other revenue streams.”
Thanks to the economies of do-it-yourself ad creation and the scale enabled by digital publishing, even free sites can produce eye-popping profits.
In a research report earlier this year, Zollman estimated that Craigslist, which most people think of as being free, will generate some $335 million in revenue this year with pre-tax profits north of 80%. The site, which employs only about 40 individuals, charges for recruitment and real estate in certain markets (though they are free in others) and also requires auto dealers to pay $5 for every vehicle that they list.
By turning classifieds into an attractive form of user-generated content, digital sites have created a win-win proposition for consumers and advertisers. The only losers are the newspapers, which concentrated on preserving the high-price ads that once produced such rich, reliable and profitable revenue streams for them.
As but one example of publishers failing to wise up the ways of the web, the Boston Globe in the 1990s turned down an opportunity to invest in the nascent Monster.Com because its managers didn't want low-priced web advertising to cannibalize their lucrative print recruitment business.
New rules for mobile journalism
Although mobile publishing is quickly changing the rules of journalism, newspapers have been dangerously slow to adapt.
This has got to be fixed, because digital natives like BuzzFeed, Circa, Mic, Upworthy, Vice, Vocative and Vox are competing for – and in many cases winning over – the youthful readers coveted by publishers and advertisers.
As discussed previously here, nearly half of the digital page views at many newspapers are occurring on mobile devices. But editors and publishers have been slow to recognize that mobile publishing is as different from print-to-web publishing as television is from cave drawings.
Constrained screen real estate – like the new 1.5-inch Apple Watch – isn’t the only factor influencing the development of content for mobile devices. An even bigger issue is the limited amount of time that publishers can engage with readers.
Although consumers spend an average of 2½ hours a day poking at their smartphones, research shows that the time typically is divided into 150 sessions per day. This makes for an average session time of less than half a minute to snag someone’s attention amid a dynamically expanding list of activities that includes, but is not limited to, checking messages, making phone calls, consulting calendars, surfing the web, managing stock portfolios, monitoring the weather, playing games, updating Facebook, swapping selfies, shopping for shoes, buying movie tickets, choosing music and, as time permits, catching up on the news.
In other words, mobile publishing is the antithesis of traditional journalism, which favors deliberation and depth over the speed and sass characterizing the top mobile sites. So, yes, mobile publishing poses a vexing array of contradictions for journalists to debate and resolve. In the interests of encouraging newspapers to build competitive mobile sites, here’s a listicle to guide the way:
:: Reporting Digital deadlines are relentless, requiring journalists to publish as fast as possible – even when all the facts are not in. While some web natives are notoriously slipshod about confirming information, the continuing credibility of newspapers means they can’t publish first and ask questions later. The new “Watching” feature on the New York Times website helps solve the fast vs. fact dilemma by letting the reader watch the news unfold in real time with continuously updated staff, eyewitness and third-party reporting. Live feeds (including video, where possible), work equally well for both breaking stories and such scheduled events as the State of the Union address.
:: Presentation The limited real estate on mobile devices means stories need to be conveyed as concisely as possible, preferably with images, charts, maps and other visual cues enabling instant comprehension with a minimum of words. BuzzFeed offers a smorgasbord of carefully curated teasers on every page. Circa breaks the news into tersely written, bite-sized text blocks that eschew lengthy background. Vice.Com produced a chilling video that showed more about the Islamic State than all the billions of words that have been written about it.
:: Analysis Even though the terse presentation required by mobile media leads to atomized info-bits, readers also appreciate presentations that connect the myriad dots in a story. To explain complex events like the turmoil in the Middle East, Vocativ offers graphic flashcards. Vox does the same thing with richly annotated maps.
:: Voice The snarky mien cultivated by many of the digital leaders poses perhaps the biggest challenge to traditional journalists trained in “just the facts, ma’am” writing. While proper journalism requires scrupulous research, careful fact checking and balanced presentation, the neutral tone typically associated with traditional news writing suffers in comparison with the lively language widely employed on the web. The solution is to add as much sizzle as possible to the steak. In a classic example of how to do this, Forbes.Com wrote a piece about a terrific New York Times story titled “How Companies Learn Your Secrets” but topped it with this far-grabbier headline: “How Target Figured Out a Teen Girl Was Pregnant Before Her Father Did.”
:: Sharing Digital news is a participatory sport, especially when consumed on mobile devices. Users want to upload videos, participate in polls, offer comments, author reviews, and more. Smart digital publishers not only make it easy to contribute to their sites but also make it a snap to share links via Facebook, Twitter, Pinterest, email and other platforms. The relaunched Los Angeles Times website drops ready-made tweets in the body of its stories, so visitors can point, click and tweet. Bleacher Report not only promotes comments but also publishes metrics for each story, so readers (and contributors) know how popular they are.
None of the above is meant to suggest that newspapers dumb down their reporting. On the contrary, serious journalists need to get serious about making smarter decisions about the stories they cover – and the way they tell them – because the move to mobile is too important to miss.
© 2014 Editor & Publisher
Digital clinches control of local auto ads
The digital domination of local automotive advertising will be complete in 2015, usurping one of the most valuable revenue streams ever enjoyed by newspapers and broadcasters.
In a stunning, technology-driven shift of market power in just half a dozen years, the digital media will claim two-thirds of the $22.7 billion spent on local advertising by auto dealers in 2015, according to Borrell Associates (report here for $995).
As illustrated in the chart below, digital surged from less than 5% of auto dealer spending in 2000 to capture 50% of the local auto market in 2013, according to annual surveys conducted by the National Association of Auto Dealers, a trade group. If Borrell’s projections are correct, the digital media will capture 57% of this major advertising category this year and clinch control in 2015.
Here’s why this is a big deal: At some $33 billion a year in expenditures, autos trail only retailing as the second biggest advertising category in the United States. Two-thirds of the spending is at the local level, under the direction of individual dealerships and regional marketing associations.
Given the changes in consumer behavior discussed below, the legacy media now appear to be all but shut out of a rich revenue stream they owned a few short years ago. Here are the details:
:: Newspapers – When the Internet was coming of age in 2000, newspapers led auto advertising with 52% of the dollars spent by local dealers, according to NADA. By 2013, the market share for publishers fell to 18%. Borrell, an independent consulting company, predicts the newspaper share of the local auto ad market will tumble to 9% in 2015.
:: Radio – Second only to newspapers at the beginning of the millennium, radio sold 18% of the local auto ads in 2000 but shriveled to 3% by 2013, according to NADA. With this once-robust category almost wiped out, Borrell forecasts that the radio industry’s ad share will stay about the same in 2015.
:: Television – Local stations captured 16% of the dealer spend in 2000 and held on to 13% of the market in 2013, according to NADA. But Borrell believes the industry’s share will tumble to 9% in 2015.
To put the magnitude of the decline into dollars and cents, annual automotive classified revenues at newspapers topped $5 billion as recently as 2004 but were barely $1 billion when the Newspaper Association of America stopped reporting on the category in 2012. Industry advertising sales have declined unremittingly since then, so the number today undoubtedly is lower. We just don’t know how low.
Segmented historical data are not available for radio, but it’s safe to assume that the loss of local auto advertising contributed to the decline in the industry’s revenues from some $20 billion in 2004 to approximately $15 billion today. Because TV to date has clung to most of its auto advertising, the revenue loss has not been as significant as it has been for newspapers and radio. If Borrell’s forecast for 2015 is correct, then TV stations may begin feeling some pain in the near future.
The digital takeover of the car advertising market occurred as the auto industry climbed out of the deep sales slump that occurred in the Great Recession. Sliding from 16 million units in 2007, auto sales bottomed out at 10 million units in 2009, according to NADA. This year, Borrell predicts, the industry will return to pre-Recession levels by selling more than 16 million vehicles.
In 2007, the NADA reports, dealers spent 17% of their budgets on digital media, with the lion’s share of media buys still going to newspapers and broadcasters. The big shift to digital advertising came when digital’s share surged abruptly from 25% of the market in 2011 to 43% of the market in the very the next year. Momentum has been building ever since.
The simple reason dealers abandoned their traditional media partners is that they are following their customers, who increasingly are using the web and mobile media to shop for cars. In a recent white paper, NADA reported:
:: J.D. Powers, the market researcher, found that 80% of new vehicle shoppers consulted the web before buying a car.
:: A Polk/AutoTrader survey found that new- and used-car buyers spent respectively 10 hours and 11¾ hours researching vehicles online before contacting a dealer.
Interactive sites give car buyers an advantage they could only dream about in the pre-Internet era. With no salesmen breathing down their necks, shoppers can systematically and objectively research competing brands, selecting their ideal models, colors and trim groups. They then can conveniently search dealer inventories to locate the exact car they want. And, best of all, they can level the playing field in negotiations by learning in advance the prevailing price for the vehicle.
With consumers typically visiting no more than two dealerships before settling on a purchase, dealers know they have to intercept prospects early, often and effectively as they move through the digital buying process.
Because dealers know that free hot dogs and pony rides don’t sell cars like they used to, you can count on them to divert ever more of their advertising dollars to the digital media. At least until something better comes along.