A pessimistic note from Merrill Lynch analyst Lauren Rich Fine last Friday stirred concerns that the Tribune Co., on the block since October 2006, might not find a buyer at a satisfactory price by today's deadline. Fine's prediction was echoed yesterday by Lehman Brothers' Craig A. Huber.

Losses in ad revenue and circulation are part of traditional media's decline. But are changes in the online ad market the real reason Tribune can't find a buyer?

Ken Doctor, a newspaper industry analyst with Outsell, Inc., a consultancy serving the information industries, thinks so. He recalls that "going into the sale, CareerBuilder.com was a core asset of the Tribune Company," with an impressive hold on the online recruitment market. Now, he says, Yahoo HotJobs has now found new life, and Monster has signed up 40 or so newspapers.

Despite big revenues, CareerBuilder struggled to show a profit through much of 2006, and it's unclear whether it finished the year in the black. The rate of growth in revenues derived by Tribune from CareerBuilder shrank in percent terms over the year--with 46% growth in the first quarter compared to first-quarter 2005, 42% growth in the second quarter, and 29% in the third.

In November, HotJobs signed a deal with a consortium of 176 (now more than 200) newspapers around the U.S. The simple existence of viable competitors in what Doctor called "the most valuable classified vertical--recruiting and employment" may dilute the value of Tribune's stake in CareerBuilder, which it owns with two other newspaper companies.

In short, Tribune has lost its digital mojo.

That could mean dissident Tribune shareholders miscalculated when they pressured the company into an auction in 2006. "They really overestimated the value of newspapers, but that's an easy thing to do," says Doctor, "because the market value of newspapers has dropped so quickly. The factors that determine value have also been changing pretty fast."

Tribune owns a 42.5% stake in CareerBuilder, which was valued in August 2006 at $1.55 billion to $1.7 billion, contributing to Tribune's theoretical valuation of around $7.7 billion. At the end of the third quarter, CareerBuilder remained far ahead of Monster and HotJobs, according to Dennis FitzSimons, Tribune Co.'s chairman, president, and CEO--with 23 million unique monthly visitors, compared to Monster's 11 million and 16 million for HotJobs.

But that was before Yahoo's newspaper deal. Many of the papers in that deal were originally excluded from the CareerBuilder network by Gannett, McClatchy, and Tribune, so the HotJobs consortium was positioned as a competitor to CareerBuilder.

Although online classified ads are only part of the picture, they're particularly important to newspaper companies, which have been looking to the Web for growth. According to some estimates, classified ads make up 60% to 70% of newspapers' online revenue. Any slowdown in the housing market would only make job recruitment more important.

In an October note, Deutsche Bank analyst Paul Ginocchio warned: "The biggest drivers of the change in ad growth over the next two-to-three quarters will be real estate and help-wanted classified, both of which are showing weakening trends."

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