• by Erik Sass , July 11, 2007

Although it got a low-key rollout in the U.S., eBay's Kijiji classified service could grow to be as important as its other businesses, according to UBS analyst Benjamin A. Schachter. While that's good news for eBay, it spells more trouble for newspapers--unless they find a way to partner with the online auction giant.

In a note to clients, Schachter noted the substantial local thrust of the eBay classifieds service, which allows nearby users to buy and sell goods and services difficult to ship long distances, such as babysitting or big pieces of furniture. Of course, the classifieds service will also work for employment, real estate and automobile listings--the heart of newspaper classifieds.

The eBay-Kijiji announcement represents another serious threat to the newspaper industry, where revenues are hemorrhaging as listings migrate to online competitors like Craigslist. In the first quarter of 2007, automotive classified revenues fell 20.1%, real estate fell 14.2%, and employment fell 14.3%, compared to the same period last year.

However, there is one attractive option that could mitigate the damage: a partnership between newspapers and eBay. Such a deal is not beyond the realm of possibility, as partnerships between newspapers and online players have become commonplace over the last year.

In October 2006, Yahoo HotJobs signed a deal to share listings with a national consortium of newspapers, including properties owned by Belo Interactive, Cox Newspapers, Hearst Communications, the Journal Register Company, Lee Enterprises, MediaNews Group, Media General and Scripps Howard Publishing. The alliance has grown to include over 200 newspapers in 40 states.

Subsequently, in May of this year, competitor Monster.com signed a deal with Community Newspaper Holdings to create Web sites for 80 of its properties, focusing on classified employment listings. It also has deals with the New York Times Company and The Philadelphia Inquirer. "There is potential for a deal with eBay," according to Ken Doctor, a newspaper analyst with Outsell, Inc. "Over the years, eBay has approached newspapers episodically, but they didn't have people who have knowledge of the business." But with former newspaper executives moving to online players like Yahoo--and vice versa--eBay could easily acquire individuals with the right experience to make connections.

Doctor pointed out one obvious problem: Kijiji's listings are free, "which hurts newspapers by driving down prices." eBay executives say Kijiji could begin offering paid listings for certain premium services, such as sorting and matching job candidates to specific employer needs. "If services like that are added, and as the intelligence of the Internet grows," he adds, "you can charge for it. That's an area where it could make sense for newspapers and eBay to join forces."