Sources of classified ads on the Web Capturing the gay market SPECTER OF ONLINE CLASSIFIEDS SPURS PAPERS TO EXPERIMENT: ANALYSTS ASSAIL INTERNET AD APPROACH AS SCATTERSHOT

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People can find just about anything in the classified advertising section of a local newspaper. Looking for a puppy, house, car, furniture, rare stamps or even a new boyfriend? They're all just an inky hand and a few strange abbreviations away.

Total revenue for print newspaper classified advertising hit $16.76 billion in 1997. That's a growth of 11.3% over $15.1 billion in revenues for 1996, says Tony Marsella, VP-classifieds at the Newspaper Association of America.

"Every category of classified was up. The largest increase was for recruitment classified advertising -- up a whopping 20.4% to $6.981 billion," Mr. Marsella says.

Other increases occurred in the following categories: real estate was up 6.4% to $2.97 billion; automotive was up 5.9% to $4.28 billion and a miscellaneous category, including private-party advertising, general merchandise and smaller accounts, was up 4.3% to $2.513 billion.

IMPORTANCE GROWS

Mr. Marsella says the newspaper industry has been aggressively defending and expanding its classified franchises on the print turf -- and the increase seen last year marks a third year of growth for print classifieds.

Meanwhile, he says, individual newspapers recognize the growing importance of online classifieds.

"In 1998, we will see more newspaper Web sites than ever before and newspapers are learning how to harness the Internet rather than view it as strictly a challenge," says Mr. Marsella.

But when classified ads go online, more than the medium changes -- thousands of new eyeballs, nationwide exposure, few space constraints and expanded interactivity are just a few of the shifts.

FRESH COMPETITION

It's those changes, along with the potential revenue, that are spurring new competitors to jump into the fray. Media Metrix and Relevant Knowledge count Microsoft Corp., America Online, Yahoo! among the most used. Placement services such as Classified Warehouse (formerly AdOne) and Excite's newly acquired Classifieds 2000 are looking for a piece of the action along with newspapers.

Jupiter Communications estimates total online classified advertising revenue will grow from $123 million in 1997 to $830 million in 2000. By the end of 2002, Jupiter predicts that market will reach $1.9 billion -- representing about 10% of the total classified market.

Online consultancy Forrester Research comes up with similar numbers, predicting online classifieds will be a $1.5 billion business in the next three years.

Some analysts have criticized newspaper efforts to cultivate online classified advertising as a scatter-shot approach.

"While it might appear there is a scatter-shot approach, you can't get away from having to experiment with different models," says Mr. Marsella. "It is a brand new delivery system and we have to try as many approaches as necessary until we hit a model that works."

"Even the competitors are experimenting with what the model is going to be. How exactly will we make money?" says James Conaghan, director of market & business analysis for NAA.

TRIAL TIME

There is still trial time, though, Mr. Conaghan says, because the Internet is not a mass medium yet with only about a quarter of households online.

"Classified in print had a very good year in '97," he says. "We expect that to continue for any number of years and while the economy remains good."

"The whole thinking from publishers used to be that giving classified online for free was a bad idea. Now the thinking has changed to it is something they should do, but they should do it in a way to reinforce the power of what they're giving and to reinforce their relationship with their customers," says Dominique Paul Noth, new-media consultant and chairman of Online News Summit, an annual conference for online newspapers.

TREND TO FREE

Meanwhile, newspapers must still offer free online classifieds -- which, indeed, has been the trend. Few, if any, sites charge for online classifieds.

Mr. Noth says newspapers are subsidizing free online classifieds by raising rates of offline classified advertising. Advertisers seem to have accepted the increase for the online trade-off and the chance to experiment in the new medium, he says.

Some newspapers concentrating on building a local audience as a national audience offer multiple city sites such as Knight-Ridder Newspaper's Real Cities (33 sites); AOL and Tribune Co.'s Digital City (38 sites); Cox Interactive Media's CIMnet (15 sites); and Advance Publications' Internet group of city sites (six sites.).

Along with multiple city areas where classifieds are posted mostly by geographic region, new efforts to focus on nationwide category classified ads are emerging. The most popular categories so far are automobile, real estate and employment.

REAL ESTATE BID

Microsoft has CarPoint, with an upcoming real estate site expected to be launched as either HomeAdvisor or Boardwalk. Careerpath.com for job seekers was co-founded by six major newspapers -- The Boston Globe, Chicago Tribune, Los Angeles Times, The New York Times, San Jose Mercury-News and Washington Post.

The parent companies of those newspapers finance the site with an additional investment from Cox Interactive Media, Gannett Co. and Hearst Corp.

One of the newest joint efforts, formed by Times Mirror Co., Tribune Co. and Washington Post Co., is even more specific, looking to capture online classified sales in particular successful categories. Classified Ventures, which was launched in December, has automobile (www.cars.com) and apartment locating (www.apartments.com) sites, and plans to add real estate (www.newhomenetwork.com) later this year.

The focus for the venture is building national brands through consumer marketing and online distribution, says acting CEO Tim Landon (the company is in the midst of a CEO search and Mr. Landon is a candidate). Classified Ventures takes ads through sales reps from traditional newspaper partners such as auto dealers and real estate agents and from individuals.

"There is a lot of competition out there, but we feel very confident we can beat them," Mr. Landon says. "And that's not just traditional newspaper guys beating our chests and saying we're the biggest and baddest. We're building something much more like a national TV network than a traditional newspaper."

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