Yahoo Accelerates Classified Ad Cannibalization

Yahoo recently announced that they would add job posts, spidered from other job sites and company job listings on the Internet, to their HotJobs. This might seem like a simple way for the #3 job board to address the critical mass issue and leapfrog the competition. But the ramifications are far deeper and should scare the hell out of online classified ad companies and, more importantly, newspapers.

In a previous post, I mentioned that owning the customer is far more important than owning the advertiser. Well HotJobs seems to agree. As the number three job board, they decided that they wanted to become the #1 destination for job seekers at the expense of cannibalizing the entire segment.

It is a classic approach of cannibalizing the market in order to leapfrog the competition. Become the leader, then make money through additional features. Retailers used to call it the loss leader that generates customer traffic. I’m sure this scares Monster and CareerBuilder, but the people who should be quaking in their boots are the newspapers.

Let me explain: In 2004 online employment generated about $1.2 billion in revenue. But printed employment ads generated $4.6 billion for newspapers. That represents 27.7% of their total classified ad revenue, which was $16.6 billion in 2004. It is one thing for Craigslist and their bohemian classified ad board to offer free ads (and even they charge for job posts in some areas), but when a major portal tells companies that instead of paying to list their ad with a job board, they can put it on their own website and Yahoo will aggregate it for FREE, that is a game changer.

So what is the next shoe to fall? Housing and Automotive are the other two of the big three revenue generators for newspapers and online classified ad companies. Are they next? In my opinion, it is just a matter of time before these two segments are also spidered into an early death. It’s enough to give newspapers a serious case of arachnophobia.

Sure some little job boards were already aggregating job posts for free, but Yahoo has now made it the standard. They have created a slippery slope and it’s the newspapers that are sliding down it. Printed classified ads only provide a listing. Yahoo is making that free in order to sell add-on services. On top of this, online classified ads provide a far superior user experience than printed ads. So how will newspapers compete with free?

I wrote a while back that basic classified listings would become free, Yahoo has now made it official. No doubt Google will be right behind Yahoo, and then the floodgates will fly open.

Craigslist has been a thorn in the side of newspapers, now Yahoo puts a stake right into their hearts. By cannibalizing online employment, they have started down a slippery slope that will send newspapers into the abyss where their $16.6 billion in classified ad revenue begins drying-up.

tags: classifieds, yahoo, jobs, craigslist, newspapers