Craigslist: Killing Local Newspapers Since 1997
I didn't find my job here at Vertigo through a classified advertisement in a newpaper, or a commercial job search site like monster.com. I found it through a job ad I saw on craigslist.org. There's a fascinating article in the San Francisco Weekly about the surprising impact Craigslist has had on Bay area newspapers:
The average person who posts an apartment for rent on Craigslist has no clue that the decision affects her local newspaper. All she knows is that, by filling out a short form, she can attract a dozen potential renters to her doorstep that weekend. No fees, no spam, no annoying pop-up ads. The same is true for personals, used car sales, and, in most cities, jobs.
The hidden cost, though, is that newspapers make their money largely, or solely, via advertising. Media businesses are cagey about revealing how much revenue comes from classifieds, but the percentage share is usually well into the double digits, and profit margins are high. A five-line, text-only ad for a used car in the San Francisco Chronicle costs $39 for 10 days. Compare that to Craigslist, which offers as much space as you need, plus photos, for free. With millions of newspaper readers choosing Craigslist, newspaper revenue losses are adding up.
The hardest-hit publications are in the Bay Area, which accounts for about one-quarter of Craigslist's traffic. The Chronicle and its competitors lose more than $50 million per year because of job ads that have migrated to Craigslist, according to a 2004 report by Bob Cauthorn, the former vice president of digital media at Chronicle Web site SFGate.com, who is now working on his own media venture, City Tools.
In the past year, the number of Craigslist Bay Area job postings per month has almost doubled, to more than 20,000.
The San Jose Mercury News alone misses out on $12 million annually in employment ad revenue because of Craigslist, according to recent estimates by Lou Alexander, who retired as the paper's advertising operations director two years ago. (Both studies accounted for the fact that not all Craigslist posters would otherwise have bought ads in papers.) A few million is a relatively small loss for Knight Ridder, the $3 billion chain that owns the Merc, but it's a fortune inside an individual newsroom. In November, Merc Publisher George Riggs cut 52 editorial and eight business employees, laying off the entire staff of community papers Viet Mercury and Nuevo Mundo and buying out dozens more in the Merc's newsroom. This saved the Mercury about $6 million in salaries by losing 16 percent of the editorial staff but offset only half of its Craigslist-related annual losses.
The article is written by a newspaper reporter, so they're not necessarily the most unbiased observers. They're understandably bitter about the loss of revenue from classified and job ads.
But I think the claim that Craigslist is to newspapers as Wal-Mart is to local business is certainly a fair one. Clearly newspapers have to compete with newer, cheaper online alternatives, but Craigslist is a special case: it's almost completely free. How do you compete with free? Making things even more complex is the fact that Craigslist isn't quite a commercial enterprise, and it isn't quite a non-profit organization, either:
As a private for-profit, Craigslist doesn't have to publicly disclose anything. SF Weekly parent company New Times doesn't release many financial details, either. Newmark, though, views his creation as something different. "We do a better job as a nominal for-profit," he says, "but we exist in a category that doesn't really exist in the law."
That "category" allows Newmark to keep the domain Craigslist.org, a name that gives the false impression that the site is a nonprofit, by using ".org," an extension almost exclusively used by nonprofit companies and foundations. Craigslist's marketing materials call this "a symbol of our service mission and non-corporate culture." (Craigslist.com, which the company also owns, draws far less traffic.) It permits Newmark to use the word "non-commercial" twice on Craigslist's "Mission and History" page, and to bury the phrase "No charges, except for job postings" in the third line from the bottom. It means establishing a separate nonprofit, the Craigslist Foundation, which trains other nonprofits in marketing, technology, and fundraising skills, but makes no grants, has no endowment, and charges for many of its training events. This year, Craigslist will provide less than half of the foundation's $240,000 budget.
"We are a marketplace, like a flea market," Newmark says. "A flea market is more social and entertainment than commerce. In more formal terms, we are a community service. We have a company structure because that's the way life works, but that's kind of tertiary."
Even Buckmaster admits that Newmark's vision is a little utopian: "He still has trouble seeing us as a corporation, and taking seriously all the things that a corporation has got to do."
The article goes on to elaborate quite a bit on some of the strategies Craig is advocating to help newspapers adapt to the brave new world of free classified advertising -- something like Wikipedia, but for journalism. We'll see.