• by Erik Sass  @eriksass1, September 11, 2006

Classified advertisers buying space in The New York Times now have the option of having their ads run in Metro New York as well--the first such partnership between the nation's leading paper and its biggest free commuter daily. The first shared classified ads ran with little fanfare on August 28th, but the development has major implications for newspapers as they struggle to keep print operations profitable.

As part of the deal, individuals placing ads in the Times for recruitment, real estate, automotive and general merchandise categories will be able to upgrade to dual placement in Metro for an extra discounted fee. These classified ads will bear The New York Times' brand. Interestingly, classified ads that are slated to appear in the Sunday edition of the Times will run in Metro on Friday--meaning that the free daily's readers will see them two days before the Times' readers.

Media analysts have emphasized the importance of classified ads to papers' future vitality, and the threat posed to this business by new media like the Internet. In May, for example, Lauren Rich Fine of Merrill Lynch noted the inroads by Web competitors, saying "migration of highly lucrative classified ads to the Internet is squeezing margins and hampering growth." However, Fine also said that simply duplicating classified operations online isn't enough to save newspapers, which often still lose market share.

And the online problems don't end there, according to Ken Doctor of Outsell, Inc., who said the medium hugely devalues newspaper readership in general. Papers generally need anywhere from 3 to 100 online readers to match the ad revenue for one print reader, Doctor noted--varying depending on who you ask. These estimates describe regular commercial advertising, but the same downward pressure likely affects classified ad revenue to some degree.

With online classifieds falling short of the mark, it's critical for newspapers to find ways to strengthen their beleaguered print classifieds business. And partnerships between big-name nationals and free commuter papers could well be part of the fix.

During the week, according to Daniel Magnus, managing director and publisher of Metro New York, the two papers together have a combined unique readership of about 2.2 million, with each contributing about half the total. In the latest FAS-FAX report for newspapers from the Audit Bureau of Circulations, The New York Times had an average daily circulation of about 1.15 million, while Metro New York had just over a million.

As the numbers indicate, there's little overlap between the two papers' readership, meaning it's a relatively safe move from a strategic perspective. Indeed, Magnus boasted that over 80 percent of Metro New York's market is unduplicated: "We're basically creating a new market for newspapers." Magnus said Metro New York is targeting employed people ages 18-40, who are less willing than older readers to be willing to pay for newspapers because of the rise of the Internet. According to Scarborough Research, the average reader is 36 years old and has an income of $87,000 a year.

"You've got a captive audience for however long their commute is, 15 minutes to half an hour, you're offering them a free product with local relevance, and--best of all--you're reaching them as they're getting on or off a train," Magnus said. He also noted that "the consumers we're targeting come to the point of distribution, so we don't have to go after them." According to Magnus, this allows Metro to reduce or eliminate usual costs like truck shipment and newsstand fees. With just-in-time delivery to transit nodes, the company also reduces wastage, thereby cutting costs for printing and dumping newspapers.