The much-publicized woes of the
newspaper industry are due, in large part, to the collapse of classified advertising revenues, and 2010 may well have been the year that buried them for good.
Wherever you looked -- real
estate, the job market, the auto industry -- the news was bad, not to say disastrous. Combine that with the secular shift to online classifieds, and you have a perfect storm of adverse business
conditions.
Classifieds used to be a mainstay of the newspaper business, reflecting their once-dominant position in local media markets. In 2000, classifieds contributed $19.6 billion or 40% of
total newspaper ad revenues of $48.7 billion, according to the Newspaper Association of America.
But beginning in 2006, the market begin softening noticeably, due to competition from free online
classifieds offered by sites like Craigslist, compounded by the bursting of the real-estate bubble. From 2005-2007, total classified revenues slipped 18% from $17.3 billion to $14.2 billion, with real
estate leading the way with a 22.6% drop in 2007.
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And this was just the beginning.
The worldwide credit crisis and ensuing recession kicked the decline into high gear in 2008, when the
real-estate category was joined in its pit of despair by employment and automotive -- a triple whammy that has delivered newspaper classifieds' coup-de-grace.
From 2007-2009, total classified
revenues tumbled a remarkable 56% to just $6.2 billion -- less than one-third of their 2000 level. And they're still falling: In the first three quarters of 2010, total classified revenues came to
just over $4 billion, down 10% from the same period last year.
The figures are even more incredible when you look at specific categories.
From $2.14 billion in the third quarter of 2000,
employment classified revenue has fallen a breathtaking 91% to just $185 million in the third quarter of 2010. From a peak of $1.35 billion in the third quarter of 2006, real estate fell 78% to just
$302 million in the same period this year. Meantime, automotive plunged from a peak of $1.22 billion in the third quarter of 2003 to $307 million this year -- a 75% decline.
What's more, the most
recent economic data suggests there is no hope on the horizon for any of these beleaguered categories. The U.S. unemployment rate edged up 0.2% to 9.8% in November, after 112 out of 372 labor markets
reported their highest unemployment rate in a decade in October. Residential real estate appears headed for a long-term stagnation or decline, reflected in a 1% decline in housing prices from
September to October, and a 0.8% year-over-year decline as measured by the Case Shiller Composite-20 Index, leading many economists to predict a double dip in the housing market.
U.S. auto sales
are the one relative bright spot, with Standard & Poor's forecasting a 12.9% increase in new car sales in 2011, to about 13 million vehicles -- but new auto sales don't necessarily benefit newspaper
classifieds.
While new car buyers traditionally have used cars to sell, this potential source of demand for classifieds was almost certainly diminished by the "Cash for Clunkers" program, which
encouraged potential used car sellers to simply take their old vehicles out of circulation for good, rather than try to resell them.