• by Mark Walsh  @markfwal, January 30, 2007

When it comes to competing with arch foe Craigslist, newspapers and other local publishers should stop charging for merchandise ads and develop an online classifieds brand separate from their traditional Web site. That's the advice offered by market research firm Classified Intelligence, based on an 18-month study of Craigslist in a dozen markets including Baton Rouge, La., Knoxville, Tenn., Mobile, Ala., and Ithaca, N.Y.

Surprisingly, the firm's new report concluded there is no evidence that Craigslist takes significant dollars from local newspapers' real estate and job listings in small- to mid-sized markets. "Large metropolitan markets, where ad volumes are considerably higher, are likely a different story," noted the study. A previous report on Craigslist by Classified Intelligence, for instance, found that the free listings powerhouse pulled at least $50 million to $65 million from Bay Area newspapers annually in help wanted ads alone.

And in the communities it studied for the report, the firm found that the younger and better-educated their populations, the more likely that Craigslist is to be the volume leader in the marketplace. In middle markets, Craigslist mostly ends up filling an unmet need for free, low-hassle merchandise ads. "It is in this category that Craigslist grows the quickest--almost invariably beating the local newspaper within just a few months," stated the report.

By offering free merchandise classifieds and gradually introducing contextual ads and special offers around them, newspapers can blunt Craigslist's incursion. In its 30-page study, Classified Intelligence also counsels newspapers to add more community features, adopt pay-for-performance advertising and offer a paid delivery service to "community members," among other steps to better compete with Craigslist. "Be creative and take risks. Going beyond what Craigslist offers is essential," according to the report.