• by Ross Fadner , October 7, 2005

If Google succeeds in its bid to provide San Francisco with free, city-wide WiFi, analysts say that telecommunications firms and Internet service providers won't be the only companies feeling threatened. Local newspapers, which generate much of their ad revenue from local businesses, could find themselves competing directly with the global advertising giant for local ad revenue.

Preston Gralla, a former editor in chief of a chain of local newspapers and a blogger for Networking Pipeline, writes that a Google-powered WiFi network could spell financial ruin for many papers, because a city-wide network would enable the sponsored listings provider "to deliver ads literally on a block-by-block basis."

"Hop onto a free Google hot spot," Gralla said, "and ads may tell you about a good lunch deal around the corner, a sale at a nearby sporting goods store, cut-rate discounts at a local electronics shop." Gralla added that local ads are keeping many small papers afloat, but "if Google can better deliver targeted ads to free hot spot users, we may see some papers go under."

Media economist Miles Groves of MG Strategic Research agreed that competition for local ads and classifieds could intensify if Google is allowed to bring free WiFi to San Francisco. "The city has already been hit by Craigslist," he added.

Craigslist--a global online classifieds site that started in San Francisco--is free for most consumers and businesses, except in New York, San Francisco, and Los Angeles, where it charges for posting help wanted ads. A December 2004 study by media consultancy Classified Intelligence estimated that Craigslist costs newspapers in the San Francisco Bay area $50 million to $65 million in employment advertising revenue.

Peter Zollman, founding principal of Classified Intelligence, agreed that Google's entry into Internet delivery would pose yet another "big threat" to newspaper revenues, but he was quick to add that local papers and Yellow Pages companies still have one big advantage: their relationships with local advertisers.

"These [companies] know what local advertisers need; they've been selling to them for decades--centuries," Zollman said, adding: "Google cannot field a local sales force in each market"--which he said makes a big difference to businesses that don't have the time or the resources to manage complicated marketing campaigns.

However, Zollman noted ominously that "Google could certainly afford to buy a Yellow Pages company if it wanted to."