The Future of News

The national expansion of northern California’s Craigslist, which offers free classified ads over the Internet, stunned many metro daily papers because they typically had been receiving 30-40% of all their revenues from classified ads. Still, many harbored the hope that Craigslist might not develop into a serious threat because, after all, it was a funky web site, it was a Silicon Valley phenomenon that might not catch on anywhere else, it was giving away services for free, and had an unproven business model.

But now that Facebook and eBay have recently entered the online classified ads business, most recently with eBay’s U.S. intro of Kijiji, it is becoming much more difficult for newspapers to rationalize the threat away. Both are companies which have had national success, and eBay is a proven, solid money maker. But the really new twist is that both can combine information collected from their base businesses with that of their new classified ads businesses to yield an all-new way to generate profits from classifieds that is unavailable to newspapers. Specifically, Facebook can create targeted advertising opportunities for advertisers by combining their classifieds info on who bought and sold what with their demographic and lifestyle info collected from Facebook. eBay can similarly develop targeted advertising opportunities by creating a superior database of buyers and sellers that combines their classifieds and eBay purchase data. So, if tech firms have suddenly decided that the Internet classifieds business looks less like a speculative loss leader and more like a big potential area for profits, newspapers may have to adjust to running their operations with 30-40% less revenue. (Hat tips: Lost Remote, Scott Karp).