• by Shankar Gupta , July 5, 2005

Classified Ventures, an online classified advertising company jointly owned by six large newspaper publishers--Belo Corp., Gannett Co., Inc., Knight Ridder, The McClatchy Company, Tribune Company, and The Washington Post Company--Friday announced it acquired HomeGain, an online real estate site.

Kelsey Group analyst Greg Sterling said Classified Venture's move is consistent with its overall strategy thus far--snapping up established vertical sites in popular classified categories like automotive and real estate. "HomeGain is a very, very prominent--top two or top three--site, and it's also been one of the leaders in terms of lead delivery," he said. "It's consistent with their vertical strategy."

The financial terms of the deal were not disclosed. CEO of HomeGain, Richard Sommer, will remain on board after the purchase, and will become the president and general manager of Classified Venture's real estate verticals. Classified Ventures already owned a separate real estate vertical page, Homescape, which will be integrated into HomeGain.

Jim Townsend, editorial director of classified advertising consulting firm Classified Intelligence, said the deal helps Classified Ventures beef up real estate ads currently facing stiff competition from Craigslist and other sites. "If you're going to offer realtors and homeseekers any kinds of services at all, you have to offer services beyond simply putting that ad that's in print online," he said. "That's just not enough anymore."

Sterling agreed that Classified Venture's strategy is aimed at recapturing classified users who have migrated to the Internet from the print classified pages. "More and more consumers with broadband connections are doing more things online that they used to do exclusively in the print newspaper," he said. "This is an effort to have a strong presence in a real estate vertical."

But while this tactic may lead to short-term gains of new revenue streams, Sterling said, in the long term, outsourcing to established classified verticals could take power away from individual newspapers' brands. "It may deliver revenue or ads, but it doesn't boost the newspaper brand," he said. "That's the question I have about the overall strategy: Over time, if you don't promote your newspaper brand, what happens to that brand?"