It's a tense situation.

Even as they maneuver to form relationships, newspapers are still threatened by the explosion of online classified services. In 1990, newspapers' annual revenues of $11.5 billion from classifieds represented over 35% of their total ad revenue--about $32.3 billion. This percentage grew as overall revenues increased throughout the 1990s, with classifieds contributing 40% of a total $41.3 billion in 1997 and the same proportion of a total $48.67 billion in 2000. The $19.6 billion that year was the high-water mark for classifieds. In the face of online competition, revenues dipped to $17.31 billion by 2005, or 36% of the overall.

Seeking to stem the tide by capitalizing on economies of scale and geographic reach, newspapers first turned to each other, setting aside rivalries to form national classified networks. Thus, Tribune and Knight Ridder took control of CareerBuilder.com in 2000, with Gannett later joining in 2002 and Scripps signing on in 2005. Earlier, Tribune had joined with the Times Mirror Company and The Washington Post in 1997 to create another national network for auto classifieds, called Cars.com.

The flurry of activity was driven by fear of competition from online classifieds services, like Monster.com, founded in 1994, and Hotjobs.com, acquired by Yahoo in 2001. Both posted impressive growth numbers. Indeed, a 2006 Deutsche Bank study noted that the survival of newspapers relies on affiliating with networks and forming an online classifieds presence--either by creating one or allying with an existing player. The report, "Class System in Classifieds," states that newspapers that are part of the CareerBuilder network held on to an average 57% of their online classified markets, versus 41% for those that are unaffiliated.

However, over the last year the tables seem to be turning--with the online powerhouses approaching smaller newspaper networks and unaffiliated newspapers to maintain growth. "The stakes rose quickly with the Yahoo-newspaper deal," according to Ken Doctor, an analyst with Outsell, Inc., which provides research to the information industries. Doctor also pointed to Monster's appointment of Peter Newton, a Boston Globe vet, as senior vice president for small and medium businesses in June 2005.

In the last year Monster signed an agreement with 55 newspapers, including the properties of the New York Times Company and the Philadelphia Inquirer and Philadelphia Daily News, both owned by Philadelphia Media Holdings. And in November, HotJobs signed a deal with a consortium of 176 (now more than 200) newspapers around the U.S.

Characterizing the overall mood of online classifieds, Doctor said: "Right now, it's a land rush. National recruitment Web sites are trying to grab as many listings as they can and as much audience as they can. Competition is fierce." Doctor added that publishers will probably try to "hedge their bets--participating in not just one, but multiple networks, as they try to drive the best deals they can." Importantly, Monster's deal with Adicio isn't exclusive, meaning that the participating papers can still strike deals with other sites like HotJobs.

This news story is important. I recommend that everyone read it.