Media: Warning: the Internet will eat your advertising

The Net has started to devour the classified revenue of the US press. So will their British counterparts suffer a similar fate?
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The Independent Culture
IF THE computer revolution of the Seventies helped to rescue print journalism by streamlining production and cutting costs, will the communications revolution of the Nineties - the spread of the Internet - kill it off?

It is a question already looming large in the United States, where 36 per cent of the population accesses the Internet at home (compared with barely one third of that proportion in Britain) and most regional and city newspapers, not to speak of the famous names such as The New York Times, The Washington Post and The Los Angeles Times, can be read via the Internet. These papers are available in your own home even earlier than they hit the newsstands, and mostly they cost nothing - compared with the 25 cents to a dollar per issue (two dollars or more for the mammoth Sunday editions) you would have to pay for the real thing.

The websites vary in how much of the newspaper they make available and how often they update their stories. But only The Wall Street Journal - like the Financial Times - requires you to have a subscription to read more than a sampling. Almost the only downside for an avid newspaper reader is the requirement to register. Many newspapers want to know who their readers are, and require completion of a detailed questionnaire, including name, address and phone number. In the US, because of pervasive economic and racial segregation, this information is likely to reveal more about your personal circumstances than comparable information would do in Europe.

For the US newspapers the crunch point is the extent to which the Internet will eat into and perhaps devour their classified advertising revenue. For newspapers that have an urban or regional monopoly (and that means the majority, including such papers as The New York Times and The Washington Post), the classifieds are their lifeblood.

Uncontested advertising revenue has enabled these newspapers to maintain staffing levels through the technological revolution that are the stuff of long-distant memory in Britain. More than 800 people are employed at the Washington Post, for instance; 10 per cent of them in a department that deals with their Internet site and business.

Once these newspapers are on the Internet, their market is national and even international. Advertisers may find that they can reach potential customers more efficiently and economically on their own. Indeed, newspapers on the West Coast, in particular, are already beginning to report falling revenue from classifieds.

According to figures published in The Economist, help-wanted advertising at The Los Angeles Times fell by 8 per cent between the fourth quarter of 1997 and the same quarter of 1998; for jobs in information technology the fall was 15 per cent. At the San Jose Mercury News, classified revenue in 1998 was down by 8 per cent from the previous year's level, and help- wanted revenue by 15 per cent.

Consumers, similarly, are finding that they can find the information they need - whether it is about goods to buy, places to visit, films to see - more quickly and efficiently online. Bargain-craving Americans are especially taken with "auction" sites where they can bid for anything from antiques to air tickets in a market that is truly nationwide.

One option, already embraced by some newspaper groups, and being tried by The New York Times, is to join forces - or even buy - an existing Internet service. The Internet service receives a news supply and a respected imprimatur; the newspaper receives payment and a cut in the - now national or global - advertising revenue. But such arrangements are not without controversy. A tentative New York Times plan to spin off its Times Company Digital division has already fuelled fears in the newspaper proper that the "tail' could start to "wag the dog".

The questions crowd in. Is a newspaper still a newspaper if it appears online and is constantly updated like a news agency wire service? Do newspapers in the long term have a saleable product in their news, features and comment that is sufficiently different from what agencies and Internet services already provide? Will newspapers still feed off their advertisers? America's Internet gurus emphatically say "No". And they conclude that the newspaper is speeding towards extinction.

Perhaps it is wishful thinking, but the answers in Britain may not be quite so categorically negative, at least not yet. While the number of Britons using the Internet may grow rapidly, the amount of time people spend online will be restrained by higher phone costs. Access to the Internet service may be free, but time has a price: buying a newspaper could be cheaper. In the US it is the other way round.

It is not just the expense of telephone time that gives readers less incentive to obtain "newspaper" news online. The smaller distances mean that national newspapers are readily obtainable on the day of publication; in the US, a Chicago paper may never reach the West Coast except on postal subscription. Above all, there is already a national classified advertising market in Britain, just as there is a national newspaper market, and they are both highly competitive.

Newspapers may be a dying species, but the variegated British breed is tough, and its twilight years may last just long enough for it to teach the US something about how a free market works.

Even in the US, reports of the newspaper's death may be just a little exaggerated. Advertising revenue at The Los Angeles Times rose 35 per cent in the second quarter of this year, and Times Mirror's second quarter profits were up 6 per cent. There is life in news print yet.

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