Friday, September 09, 2005

The Internet vs. Newspapers

I always find it interesting when a combination of seemingly independent news stories starts to unveil interesting patterns or trends. Here are a couple of interesting recent news items:

  1. The San Diego Union Tribune (newspaper) in the face of free online competition makes classified ads free.

  2. Rupert Murdoch’s News Corp. buys yet another Internet property that is decidedly non-newspaper related bringing total acquisitions this year to $1.5 billion.

  3. Google is aggregating and reselling print advertising in an effort to provide a complete online offline advertising solution for small to medium sized businesses (SMB).

So a small San Diego newspaper is walking away from what has traditionally represented 40% of the revenue for newspapers. News Corp. is buying into non-newspaper Internet properties. And Google is looking to be a one-stop advertising solution for SMBs.

This tells me that free classified ads are a tsunami washing away everything in its path. Craigslist handles the local offline transactions, while eBay dominates the geography independent online transactions (fee-based of course). Who needs newspaper classified ads? Nobody. That’s the point.

Rupert Murdoch is no slouch. He saw the fecal matter colliding with the fan and figured, “hey if you can’t beat ‘em join ‘em.” He’s spending big bucks—$1.5 billion so far—to become a big player in the Internet. Ironically, these acquisitions are well outside the News Corp.’s traditional newspaper business.

As if undermining the profit opportunity in classified ads wasn’t enough, news is also free on the Internet. Just look at Topix, newspaper websites and blogs…all free. So if newspapers can’t make money on news or classified ads, what can they charge for? Local advertising?

Along comes Google, who’s clear goal is to become the one-stop shop for SMB advertising, both online and offline. Once Google, and others, take this advertising effort local, the newspapers are going to be in a real world of hurt.

Together these news stories begin to form a map of the trends in the intersection of the traditional newspaper and the Internet that does not bode well for printed newspapers.