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Why the general audience exists

Tuesday, March 31st, 2009

One word: classifieds.

By now, most people in the news business know that the collapse of classified revenue is the biggest financial threat newspapers face in the short term. But many fail to realize that not only were classifieds hugely profitable, classifieds were the only glue holding general-audience publications in one piece.

It’s one of the many reasons why startups should generally not seek general audiences.

In media that face a scarcity of supply, like broadcast television or highway billboards, things are different. But the central goal of newspapers — amassing a large general audience — is profitable only because a classified section is a snowball: the bigger it gets, the faster it grows.

(Briefly, here’s why. Obviously, every additional classified-section reader makes that section more valuable to advertisers. But because people who use a classified section want more than anything to maximize their selection of products, every additional classified ad makes the section more valuable to readers. It’s a virtuous cycle.)

All this, I’ve understood for a while. Here’s what I didn’t grok until lately: the need to maximize the classified audience used to be a huge centripetal force on news content, pulling coverage toward the center of public life, toward the things everyone shared. The publisher’s objective: maximize the audience. The editor’s marching orders: please everyone in town a little bit.

Meanwhile, there was an opposing, centrifugal force: display advertising. Unlike classified advertisers, most businesses are looking for narrow demographics. They don’t want to pay for a big display that everyone will see. They want to pay for a cheaper display that only the right people will see. The narrower your audience, the less of your marketing budget that you’re wasting.

So: retail ads would seek diversified audiences, classified ads would seek general audiences — and for a while, classifieds would win.

Then the sea change.

These days, newspapers aren’t scarce; a printing press comes free with every Internet connection. For a few years, even the lure of free classifieds on Craigslist couldn’t offset the value of the big audience offered by a newspaper. But one by one, advertisers slipped toward the free service, and the classifieds audience has followed. A tipping point came in 2007, when Craigslist’s growing audience (and that of other listings sites) got big enough to be really valuable.

More or less, this is why the crisis is happening now.

Today, retailers are still looking for niches. Retail advertisers want to push newspapers and other audience-generating businesses away from the center of public life, into all the demographic nooks and crannies.

And today, there are no classifieds to pull us back.

The logical conclusion of Newspaper Next

Tuesday, August 14th, 2007

The surprising implication of the very persuasive Newspaper Next presentation I sat through today: Screw newspapers. If newspapers don’t need us, we don’t need them.

Need I add that I’m not talking about the short run here?

No jump on this one. More about this in a later post, maybe.

The local future of vertical search

Saturday, February 4th, 2006

There’s a key difference between local and national news outlets that has so far insulated small newspapers from online competition but which will eventually leave them even more vulnerable than their bigger brethren.

Unlike national and regional papers, local papers are niche media. They cater to the tiny number of people who care about, for example, Gadsden, Alabama. Nobody else in the world keeps as many boots on the ground in a small- to mid-size community as the local newspaper.

That’s why many newspaper corporations are urging their editors to emphasize local news on their Web sites even more than in their print products. Simply: on the Web, we have competitors for our national and global content. But in small towns, local news content is still back in the happily monopolistic 20th century.

This brings us to search. Search engines let you keep a few big brands in your head, and rely on them to find content from lots of other brands. But Google and the other general-interest search kings don’t target niches well. Yes, googling “gadsden auto sales” is easier than tracking down the Gadsden Times’ classifieds, but the quality is inferior: anyone with an ad in the paper has their information up to date and tells you exactly what they’re selling. And a Google Local search is good at tracking down retailers, not connecting you with local peers.

Local news is even harder to get from a general-interest search engine. (Aggregators like Newsvine may one day have enough users to work in smaller markets, but they’re not very useful when there aren’t very many news outlets to grab from.)

So search is a great way to find things, but general-interest searches are too imprecise to seriously compete with local newspapers. What will threaten local papers–or, phrased differently, what people want but aren’t getting–are “vertical” local search engines, which are engineered to turn up local results for given searches. Search engines that users visit in order to find local results.

Vertical search is hot in niche media, and rightly so. “If Google is going to be CBS, I want to be Turner Broadcasting,” says LookSmart CEO Dave Hills, whose company offers engines for subjects like sports, food, and fashion as well as a few big metro areas. Existing vertical services like LookSmart, Oodle, the still-primitive Google Base and even the ugly, user-unfriendly Craigslist are all quite scalable. They will take over small markets eventually if local brands don’t own those markets first.

And if they do move in, small papers will be devastated, because local advertising, unlike national or regional advertising, is seldom about brand-building, which can occur through accidental encounters with display ads on a news page. Local advertising is about connecting people with stuff they’re looking for. Someday soon, somebody will build a better Craigslist, and the bottom will really fall out of classifieds. But major metro papers can weather that collapse more easily than small-town papers.

For now, those small newspapers have the dominant online mindshare in their communities. There’s no reason they can’t use this–quickly–to dominate local vertical search.