By offering buyers and sellers a free alternative to paid listings in newspapers, online classifieds site Craigslist saved users about $5 billion from 2000-2007, while costing local newspapers the same amount in lost classified advertising revenues, according to a new study by professors at the NYU Stern School of Business and Harvard Business School.
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The study, titled “Responses to Entry in Multi-Sided Markets: The Impact of Craigslist on Local Newspapers,” explored the impact of Craigslist by analyzing newspaper publisher results over time, focusing on their degree of reliance on classifieds and the timing of Craigslist entry in their market, among other factors.
Newspapers that were more reliant on classified revenues saw a bigger drop-off after Craiglist entered their markets.
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Overall, local newspapers that relied heavily on classifieds suffered an average 20.7% drop in classified advertising rates after the entry of Craigslist in their markets. Moreover, the migration of their classifieds business to Craigslist evidently had secondary impacts on local newspapers, as it was correlated with increasing subscription prices, which rose an average 3.3%; decreasing circulation, which fell an average 4.4%; and decreasing display ad rates, which fell an average 3.1%
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In terms of the chain of causation, diminishing demand for classifieds may also have diminished the incentive for consumers to buy single copies or subscribe to newspapers, since they no longer required their listings.
At the same time, price increases intended to offset losses in classified revenues further depressed subs. This trend, in turn, put downward pressure on display advertising rates.
In another secondary effect, newspapers that were heavily reliant on classifieds were also more likely to attempt to differentiate their content from competing newspapers, presumably in an effort to reinvent their value proposition to readers in the absence of classifieds. They were also less likely to make their content available for free online -- perhaps as part of a strategy to drive readers to the print edition and thus prop up print display ad rates.
The authors note,
"These results are still relevant today -- and not just to newspaper publishers -- as the boundaries between media industries are blurred and advertisers are able to reach relevant consumers through a variety of platforms, such as TV, the Internet and mobile devices.”
COMMENTARY: This article begs the question: How long will Craigslist continue to offer mostly free classifieds? Makes you wonder just what Craigslist's ad revenues would be if they charged something for those "free" classified ads.
Courtesy of an article dated August 14, 2013 appearing in MediaPost Publications Media Daily News
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