The Boston Globe is jumping into online auctions, becoming the latest newspaper to morph Web classifieds into auctions in the hope of keeping the likes of eBay at bay.
The move at The Globe's affiliated site, Boston.com, comes as newspapers' lucrative lock on print classified ads is under threat both from job sites, such as TMP Worldwide's Monster.com, and from Internet auction sites. But newspapers still could succeed if they come up with strategies that mesh the broad distribution and clout of print classifieds with online strategies including auctions.
Boston.com, a Web site for New England owned by Times Co. Digital, the New York Times Co.'s Internet division, last week launched a local online auction service (auctions.boston.com).
Boston.com partnered with FairMarket, a Woburn, Mass., provider of auction technology and services, to develop the auction area.
Boston.com is one of the first metropolitan newspaper sites that has developed its own auction site, turning online classifieds into something more dynamic and potentially lucrative. Several newspapers have linked to online auction aggregators, but few have set up their own auction areas.
ONLINE CLASSIFIEDS TO HIT $1.9 BIL BY 2002
Both online classified revenue and online auction market size are expected to grow in the next few years.
Jupiter Communications predicts total online classified advertising will expand to $1.9 billion in 2002 from $494 million in 1999, representing nearly 10% of overall classified ad revenue, said Marissa Gluck, an analyst with the Web market researcher.
As a result, more large newspapers are expected to follow Boston.com's lead, outsourcing back-end technology to create locally targeted online auctions.
EASIER TO SELL MERCHANDISE LOCALLY
"We got into the auction space to provide an additional benefit to our users and to our regional online community," said Stephanie Shore, marketing manager at Boston.com. "It's easier to [sell and] send something locally than across the country."
According to an April survey conducted by the Newspaper Association of America, online newspaper classifieds generated approximately $92 million in revenue last year, which represents about 42% of all newspaper online advertising revenue. Overall, print classified revenue rose to a record $17.8 billion in 1998, up 6.6% from '97, according to the NAA.
Auction sites are stiff competition, though. According to NFO Interactive, online auctions make up a growing segment of e-commerce: Ten percent of online users participated in online auctions during the past three months, and that number is expected to increase.
Newspapers are hardly new to auctions: Classified ads offering cars for "$1,000 or best offer" or jobs with "salary negotiable based on experience" have long been informal auctions. But papers, taking their cue from eBay, are going on the defensive with pure online auctions.
Newspaper sites are good candidates for online auctions because they carry with them a ready-made, local audience, a trusted brand name and a variety of classified advertising resources.
"We can build a marketplace that includes automotive classifieds, real-estate classifieds, business directories, coupons and auctions," said Peter Levitan, president of New Jersey Online, a destination site that also draws content and classifieds from local newspapers. "That is a very competitive tool."
But online auction "pure-plays" such as eBay, uBid and Ama-
zon.com's auction site, are threatening newspapers' online classified and auction revenue, industry experts say.
"Newspapers are notoriously slow with technology," Ms. Gluck said. "And auctioning requires greater [technology] infrastructure investment. [But newspapers] need to cannibalize themselves or someone else--like eBay--will."
And newspapers had better do that soon: EBay recently launched eBay L.A., an auction site specifically for the Los Angeles area; additional locally focused eBay sites are expected in the coming months, further threatening online newspapers' main advantage as local forums.
"If eBay developed a strong, locally branded service, that might be more of a threat to newspapers," said an executive close to the Chicago Tribune.
ALREADY LOST A CHANCE
Newspapers may already have missed one boat in the online auction space; a few years ago, some large newspapers actually considered purchasing eBay.
"There was a time when eBay was affordable," the executive said. "But newspapers are skittish about buying technology companies. So a few years ago, many turned down investing in technology plays."
"Newspapers have to do what Boston.com is doing or throw the white flag," Ms. Gluck added.
To fight back, more and more newspapers are setting up their own online auction ares.
There are different ways they can do that: Some traditional media companies have aggregated classified listings in national online properties such as Classified Ventures, Chicago. The Internet services business was formed and funded by eight media companies including Gannett Co., Times Mirror Co. and Washington Post Co. Classified Ventures owns Auction Universe Network, an online auction marketplace where newspapers, such as The Hartford (Conn.) Courant, Los Angeles Times and St. Louis Post-Dispatch, can extend their classifieds and auctions online. In this way, newspapers can target not only a local but a national audience of buyers and sellers with their pooled selection of merchandise.
The Hartford Courant, which links its CTAuctions Today site to online classifieds, offers sellers the option of placing their online auction ad in a print version in the newspaper.
"They've been able to generate additional print revenue that way," said Randy Bennett, VP-electronic media and industry development at the NAA. "We are making other newspapers aware that that model is out there."
PowerAdz.com, Rensselaer, N.Y., provides Internet infrastructure services for small newspapers. The company has more than 780 newspapers in its online network, including The Dallas Morning News and The (Bergen County) Record in Hackensack, N.J. Together, the newspapers provide aggregated content, including classifieds, automotive, real estate, employment, Yellow Pages and auction information for distribution to consumers across the country. Affiliates get access to PowerAdz.com's network's database, one alternative to developing their own database.
A WAY TO CREATE STICKINESS
Boston.com's strategy represents large newspapers' latest move into the online auction space. It's taking the next step from print and online classified ads, setting up its own online auction area to pull consumers directly to newspaper sites, upping page views and creating a level of so-called stickiness that is attractive to marketers advertising in the banner space.
To encourage use and build a database of items up for bid, Boston.com is not charging listing fees and is waiving seller fees through mid-July. Sites such as eBay generally charge listing fees of less than $1; they also charge sellers a percentage of each sale.
Boston.com soon will add The Globe's classifieds into the auction site to give merchandise more exposure, Ms. Shore said, adding that The Globe also will run print ads promoting the auction site.
Copyright June 1999, Crain Communications Inc.