Resnick, a veteran business and technology writer, specializes in online services.

She is editor and publisher of Interactive Publishing Alert, a bi-weekly newsletter from which this is excerpted.

The current IPA offers detailed descriptions of each of the sites mentioned here plus Q&As with publishers and reviews of other online sites.

Views expressed are not necessarily those of NewsLink. Classifieds in Crisis Can online newspapers stand their ground against net-saavy encroachers?


By Rosalind Resnick and Melinda Gipson
W ITH NEWS, SPORTS AND WEATHER fast becoming commodities on the Internet, newspapers are waging another battle -- the battle to protect their classified ad revenues from encroachment by net-savvy newcomers.

     This battle, while not nearly so well-publicized as the fight to defend local news against incursions by Microsoft, America Online and other technology companies, is far more critical to newspapers' survival.

     Newspapers operate at about a 14 percent profit margin, while classifieds enjoy a margin of nearly six times that, according to a recent study by the Newspaper Association of America. A loss of half of all classified advertising -- which could happen in just five years if newspapers fail to address online and other competition -- could slash newspapers' operating profit to 3 percent, the NAA's new "Classifieds in Crisis" study warns.

     In 1995, real estate ads accounted for $2.5 billion in revenues, most of which went to newspapers. However, market forces have been eroding the newspaper industry's position. Among the key challenges that newspapers need to address:

     
  • Competition from real estate brokers and their associations.

         National franchises offering TV home shows, niche home guides and online listings services all are grabbing a piece of the pie. National and regional groups like the National Association of Realtors' Real Estate Information Network offer online services of their own, cutting online newspapers out of the buyer-seller chain. Not only can online readers quickly and easily search for homes on the basis of price, features and location, but they also can match that with information on how much money a particular community spends per school child and the proximity of shopping, parks and other amenities.

         "RIN has run a fear campaign against the newspapers in many markets, making us out to be the lion coming over the mountain," says Mitch Golub, general manager for interactive services for the Fort Lauderdale Sun-Sentinel Co. "They say we're going to put Realtors out of business by putting ourselves in the loop between buyers and sellers and become the marketplace. We'd be out of our minds to do that because Realtors are the source of millions of dollars in advertising."

         
  • Competition for apartment rental ads.

         Rent Net, a Web-based real estate guide, now boasts listings for all 50 states. What's more, the service provides e-mail notification of newly listed apartments, floor plans, color photos and location maps. In contrast, the Boston Globe's Apartment Guide offers a searchable database of its extensive New England listings. But it does not yet include pictures and layouts similar to the Rent Net offerings.

         
  • Competition from Web search engines and directories.

         Yahoo, the popular Internet directory, reportedly is planning to roll out an online real estate classifieds service this summer. The service would be free and supported by advertising.

         "For those of us in the real estate industry, it is a great opportunity," one California real estate professional said.

         However, Karen Edwards, director of brand management for Yahoo, declined to offer public details about the plan, saying only that the description provided by sources was "reasonably accurate, but not 100 percent accurate."

    O F COURSE, the newspaper industry isn't rolling over -- not by a long shot. The Chicago Tribune boasts an extensive real estate section with articles and links to other real-estate Web sites that serve the Chicago area. The New York Times offers enhanced and searchable real estate listings that allow users to search by multiple criteria. The Los Angeles Times has an extensive real estate site and a large automotive area.

         The Fort Lauderdale Sun-Sentinel's Home Spot is successfully challenging The National Association of Realtors' efforts to monopolize online listings. Home Spot offers a richly layered, useable product that offers excellent information to readers. Homebuyers have made it the online resource of choice in Broward and Palm Beach Counties.

         The Sun-Sentinel worked closely with local real estate agents and brokerages to obtain their listings and to spotlight brokers in its featured homes sections. The Sun-Sentinel is not charging brokers to place resale listings but plans to next year. All other advertising on the site is paid. The Home Spot is being syndicated nationally by Interealty, the real estate solutions company formed by newspaper publishers Knight-Ridder, Advance, Cox and Tribune.

         Another way to beat the competition is to join them. That's what the The San Diego Union-Tribune has done in teaming up with its regional multiple listings systems provider, Sandicor, to create Homebuying Net.

    W ISHING TO BUILD a closer relationship with local realty organizations, the Union-Tribune several months ago created an MLS "hotsheet" that allowed Sandicor agents to create ads that would run in Sunday's paper directly from their MLS systems. Sandicor took a small percentage of the listing fees.

         As a result, when the Union-Tribune proposed creating a new product that married a zoned, tabloid monthly with a Web site, there was none of the suspicion that often separates real estate brokers from their local newspaper publisher. Monthly listings in the print publication and the Web site sell for $14 apiece and are offered as a package.

         "We feel strongly that print drives Net traffic," says Jim Drummond, The Union-Tribune's electronic publishing manager. "You can see how, when the tabloid hits the streets, traffic on the Web site goes through the roof."

         The Virginian-Pilot's Real Estate Web, created by InfiNet for its flagship Virginian-Pilot Online, offers a broker-friendly solution for member newspapers. InfiNet hopes to syndicate its classifieds program among InfiNet affiliates and other newspaper publishers. Some of the systems have been adapted for use with MLS systems because, says Chris Kouba, director of InfiNet's consulting group, "it makes a lot of sense to work with existing databases."

         At this point, Real Estate Web is geared toward use by listing agents; the systems does not yet accommodate by-owner ads. Besides the Virginian-Pilot, the system is in place (or soon to be installed) at Gannett Suburban Newspapers; the Journal Gazette and the News-Sentinel of Ft. Wayne, Ind.; the Cedar Rapids Gazette; the Fayetteville Observer-Times; The Free Lance-Star of Fredericksburg, Va.; the Times Leader of Wilkes-Barre, Pa., and the Pensacola (Fla.) News Journal.

         New Century Network, the nationwide newspaper coalition, also intends to aggregate newspaper content in the hopes that a collection of local listings will draw buyers nationwide. Some smaller papers aren't waiting for NCN, however. Ad One has gathered listings from mid-sized papers into a database of 10,000 classified ads.

         In deciding how to put their real estate classifieds online, newspapers need to ask:

         

  • Does the deal allow for co-branding?

         Smaller newspapers, in particular, need to beware of inadvertently "disenfranchising" themselves by allowing a classifieds aggregator to take over the newspaper's traditional relationship with its readers and advertisers.

         
  • Does it involve revenue sharing?

         Newspapers worried about losing half their classifieds revenue shouldn't be too quick to trade it for a share of revenue in a medium that has yet to mature.

         
  • Does it require re-engineering?

         Newspapers that are serious about competing in online classifieds are going to need to re-think their publishing systems, both online and off. Software patches that simply pull ads out of back-end publishing systems may be a necessity for now, but we believe the sooner a newspaper moves to database-driven publishing plantwide, the better able it will be to protect its editorial and advertising franchises.

         
  • Does it require a major capital investment?

         Newspapers that decide to go it alone had better start reaching for their checkbooks. While ClassiFACTS, which offers a faxable classified service to readers of its client newspapers, is toying with making a new Web service free to its fax affiliates, Newcomer Developer's Workshop of Toronto is putting a six-figure price tag on its end-to-end software solution.

         IPA's view: Change is never cheap, but, with their profit margins under attack, newspapers need to act now to defend their real estate classifieds while they can still afford it. Papers that fail to act may quickly find themselves lost in cyberspace with no way to get home.