How Newspapers Killed Themselves

We all know the Internet broke the monopoly on classified advertising. Here's the rest of the story.

newspaper
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Jack Shafer weighs in against an effort by major newspapers to get an anti-trust exemption that would allow them to band together to force Facebook, Google, and others to pay more for their content. I’m insufficiently informed on the counterargument to have a strong opinion either way. But this bit interested me:

The newspapers that are struggling to compete for digital dollars have partly themselves to blame. In 2000, classified ads made up about 40 percent of newspaper revenue, the Minneapolis Tribune reports. By 2012, that figure had dropped to 18 percent, but Google and Facebook played almost no part in this collapse. Craig Newmark built a better—a much cheaper—classified mousetrap for consumers at Craigslist. eBay also took some of the newspaper market share. But the newspaper industry itself undermined the conventional print classified business as much or more than did Newmark. As I’ve written before, newspaper companies were quick to move classified action to the new, online companies they founded. Gannett, McClatchy, Knight Ridder, Tribune, Times Mirror, Central Newspapers, A.H. Belo, and the Washington Post Co. banded together in 1998 to sell automobiles—long a classified print product—on Cars.com. In 1999, Cox newspapers created Autotrader.com. In 2000, Knight Ridder and Tribune purchased CareerBuilder.com, and two years later Gannett bought in. Apartments.com was yet another co-venture of five newspaper media companies.

POLITICO, “Newspapers’ Embarrassing Lobbying Campaign

The role of Craigslist in breaking the newspaper industry’s monopoly on classified ads is well known. Somehow, though, I had no idea that the industry itself was behind cars.com, apartments.com, and even careerbuilder.com. That’s just bizarre.

That these sites and others like them helped destroy their old business model is indeed something of an own-goal. Except for this:

One measure of how lucrative online classified ads became for the newspaper industry could be seen when the Graham family sold the Washington Post to Jeff Bezos for $250 million in 2013. The Grahams retained their share in Cars.com, which they later got $408.5 million for in 2014.

The Grahams’ share of cars.com was worth nearly twice the entirety of the Washington Post! That’s just nuts.

FILED UNDER: Economics and Business
James Joyner
About James Joyner
James Joyner is a Security Studies professor at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.

Comments

  1. What exactly could newspapers have done to prevent the loss of advertising and the shift from dead tree media to getting news online?

    I’m not sure there’s anything.

    The economic model for news is changing and it’s clear that, with the possible exception of big-name outlets like The Wall Street Journal, New York Times, and Washington Post, they haven’t figured out how to adjust to the new world.

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  2. OzarkHillbilly says:

    That these sites and others like them helped destroy their old business model is indeed something of an own-goal. Except for this:
    ……………..
    The Grahams’ share of cars.com was worth nearly twice the entirety of the Washington Post! That’s just nuts.

    That is indicative that it wasn’t so much an ‘own goal’ as it was a recognition that the future was coming and if they didn’t grab a piece of it they were going to be left holding the soon to be worth much less 20th century bag.

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  3. James Joyner says:

    @Doug Mataconis: @OzarkHillbilly: Agreed. I don’t know what the new model is. It’s incredibly expensive to do original reporting.

    I’ll probably tackle the larger issue of the anti-trust exemption at some point. I see some possibility for that to work but don’t think I support the specific plan they’re asking for here.

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  4. Kathy says:

    Here’s an interesting question: Is the purpose of a newspaper to make news stories available to the public (along with all the benefits and implication in investigative journalism, uncovering malfeasance in government and business, etc.), or is it to make money for the owners and shareholders?

    Granted, these goals are not mutually exclusive. But which is the dominant goal? The answer is not clear-cut, and to an extent they undercut each other.

    A very rich person like Bezos can afford to take a multi-million dollar loss on the Post every year for several decades, and put out a high-quality, useful, honest newspaper every day. But if he did that, he would never be able to sell one share of his paper.

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  5. MarkedMan says:

    Somehow, though, I had no idea that the industry itself was behind cars.com, apartments.com, and even careerbuilder.com. That’s just bizarre.

    I think you have this exactly backward, as Ozark Hillbilly alludes above. The revenue for the newspaper business came primarily from ads. Put another way, the business was running ads. News was the vehicle. If Allied Van Lines finds a certain size or configuration of truck is no longer in demand, they get a new truck. That’s almost always the correct business decision.

    But Craigslist (which, like all user driven internet sensation, has become a cesspool of scams and hooker ads) was only a temporary stop on the Apocalypse Express for the print media. Josh Marshall at TPM has been thinking deeply about this for years and he believes the fundamental problem is that something like, say, the Baltimore Sun had the rug pulled out from it. Previously it had an incredible draw for advertisers. Virtually all their audience was local. Through the use of inserts you could get even more local. Nothing else could cover the local area so specifically and so thoroughly. And then there were specialty news publications that had a specific type of reader like “US News and World Report”. If you wanted to reach the most people who were governmental or international influencers it was hard to beat their audience.

    But Facebook and Google changed that equation on both sides. First off, ad buyers could use their tools to get even more hyperlocal and hyperspecific than the newspapers. For example, my MakerSpace targets people who search on certain terms (MakerSpace, DIY, etc) within a 20 mile area and we do so for pennies per hit. A car dealership could ask for nearby people with two or more kids under sixteen who last bought a car 3 years ago and who have used the term “SUV” in a gmail or search. That would cost far more than pennies per view but it may well be worth it.

    And here’s the zinger. If the Baltimore Sun partners with Google or Facebook or any other on line ad company, they have no advantage over any other ad displaying website. Google doesn’t need to know that someone is reading the Sun to recognize that they are local. They can serve that ad to you no matter what site you are browsing, because they know who you are and know what site you are at. And if the Sun says, man, we are shooting ourselves in the foot, so we won’t play, it doesn’t matter all that much to Google. People are on dozens of websites a day. If they can’t serve you when you are reading the Sun, they will serve you when you are visiting CatLOLZ.com.

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  6. Just nutha ignint cracker says:

    What I’m seeing here is that the newspaper–particularly the large, metropolitan kind–has become the next buggy whip in our cavalcade of creative destruction. If that is the case, then stop worrying and start looking for the new innovation that will replace newspapers. The market will provide. And it will be wonderful because the market never makes mistakes.

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  7. Mister Bluster says:

    test

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  8. Mister Bluster says:
  9. JKB says:

    the Graham family sold the Washington Post to Jeff Bezos for $250 million in 2013. The Grahams retained their share in Cars.com, which they later got $408.5 million for in 2014.

    Am I the only one noticing that the Graham family understood what business they were in, selling ads and gutted their own newspaper? Same with the others media companies that opened advertising vehicles gutting their old medium, newspapers.

    Now, they could have opened the targeted advertising sites and used the revenue to support their “journalism” just like the old classified ad did, but they chose not to do that. Instead the “status” (news reporting) portion of their old business model was set adrift to make its way without the revenue to keep the engines running.

    This observation on the rise of magazines in the 1930s (written in 1939) seems to mark the start of this golden period of magazines and newspapers.

    In the magazine world if one excepts such liberal weeklies of small circulation as the New Republic and the Nation and such organs of the solid intellectuals as Harpers the tendency was toward a very timid discretion in the treatment of public affairs. This discretion was relaxed somewhat in 1932 and 1933, when readers clamored to know what was wrong with the management of American business and the upholders of the status quo were too bewildered to offer confident resistance, but reasserted itself after the New Deal Honeymoon. Among the big popular magazines with circulations of two or three million the only sort of militancy likely to be manifest thereafter was a militancy such as that of George Horace Lorimer of the Saturday Evening Post, who risked considerable losses in circulation (but, of course, few losses in advertising) by his incessant hammering at the Roosevelt Administration. Otherwise these magazines particularly the women’s magazines touched controversial issues timidly if at all and confined themselves mostly to highly expert fictional entertainment and to the discussion of matters to which neither their owners, their advertisers, nor their more tender-minded readers could conceivably take exception. When an attempt was made to provide, in Ken, a liberal-radical periodical of large circulation, advertisers held off and thus condemned it to an early death. But on the whole it would be inexact to say that direct pressure from advertisers affected very largely the policy of the successful big-circulation magazines. What chiefly affected them was the desire of their owners to see their own opinions echoed, to make money by pleasing and flattering their advertisers, and at the same time to provide agreeable and innocuous entertainment.

    That there was money to be made nevertheless by the sharp presentation of facts, and particularly of facts about America, was shown by the growing success of Time an expertly edited, newsy, and withal irreverent (though not at all radical) weekly and its younger sister Fortune (founded in 1930), which although edited by liberals for the benefit chiefly of the rich, developed such a brilliant technical team-research and team-authorship and trimmed its sails so skillfully to the winds of conservatism that it not only became a mine of factual material for future historians but subtly broadened reactionary minds. None of the other periodical successes of the decade promised to have so acute an effect upon the status of the writer as this adventure in writing a magazine inside the office; there were those who saw in it a threat of extinction to the free-lance journalist, a threat of the coming of the day when the magazine writer would have to look for an office job or be shut out from publication.

    –‘Since Yesterday’, Frederick Allen Lewis

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  10. Kathy says:

    @Mister Bluster:

    Great movie. I have the DVD with Roger Ebert’s commentary.

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  11. Mister Bluster says:

    Great Movie!*

    *spoiler alert

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