Deutsche: Classified Networks Boost Newspapers

Newspapers that perform best in online classifieds have usually partnered with a large online network like CareerBuilder or Cars.com, according to a new report released Thursday by Deutsche Bank.

Those sites provide the mass of postings and traffic needed to counterbalance rivals like Monster.com and Autotrader.com, according to Deutsche.

The report, "Class System in Classifieds," based on data collected by Corzen, stated that newspapers that are part of the CareerBuilder network held on average about 57 percent of their online classified markets, versus 41 percent for those that remain unaffiliated.

"Among the newspaper companies, Belo (BLC), McClatchy (MNI), and Media General (MEG), all non-affiliates, had the lowest average in-market volume relative to Monster.com," stated the report. "We believe this factor may have been one of the reasons for MNI's acquisition of Knight Ridder."

Similarly, the four companies that own the Cars.com network boasted much higher shares of the online classified market for automobiles than those which remain unaffiliated, with the Washington Post and Gannett holding 74 percent share each, the Tribune Company 69 percent, and Belo 64 percent. Currently, classified ads account for fully 37 percent of newspapers' ad revenue, according to the Deutsche report, which makes these kind of partnerships especially urgent, as the industry's position moving forward is "precarious."

The Deutsche analysts also noted the puzzling failure to create and exploit an online resume database by all but four newspapers: the Boston Globe, The Washington Post, The New York Times, and the Minneapolis Star-Tribune. The analysts note, for example, that Monster.com earns about a third of its job search-related revenue from its online resume database.

This combination of facts is making Deutsche more cautious about the stock of three major players--The New York Times, Belo, and Media General--because all three serve large markets, but haven't affiliated extensively with national networks like CareerBuilder or Cars.com (except for Belo, which is part of Classified Ventures).

The report also revealed a divergence in rates for print classified ads in large versus small markets. Newspapers serving small markets fetch 2 to 4 times the ad revenue they do in bigger regional and national dailies.

In automobile classifieds, small-market print ad rates are about twice those of large markets, in real estate about three times, and for job postings almost four times. Small-market papers are also better positioned to compete in online classifieds, in part because the big online classified sites often don't cover small towns and mid-sized cities.

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