Yes, Craigslist does take billions from US newspapers

A new study quantifies how the classified ad site has drained them of once-reliable revenue.

By Bruce Kennedy Aug 15, 2013 10:41AM

Classified ads on Craigslist website (© Alex Segre/Rex Features)For some time now Craig Newmark, founder of the online classified ad site Craigslist, has disputed claims his website has helped to kill off newspapers by diverting essential classified advertising dollars away from them.


"I’m still waiting to see any hard evidence for cause-and-effect," Newmark said on the subject, according to The New York Times on Sunday. "I’ve been paying attention for a long time."


But Newmark may now have to rethink his stance, after a new study estimates Craigslist has indeed drained billions of dollars from local U.S. newspapers.


The study, by business professors at New York University and Harvard, estimates classified ad buyers saved $5 billion between 2000 and 2007 -- during the time when Craigslist, originally a San Francisco-centric website, entered the Internet marketplace on a national and international basis.


Craigslist's numbers are impressive. The site says it gets more than 50 billion page views each month and that more than 60 million people in the U.S. alone use the site.


It's also available in 13 languages, with more than 700 local sites in 70 countries, and posts over 100 million classified ads each month (counting reposts and renewals). It claims to have more 2 million job listings available monthly as well.


The researchers also looked at the ripple effect Craigslist causes across the newspaper industry, especially newspapers that rely (or relied) heavily on revenue from their classified ads. They found a 20.7% drop in classified-ad rates overall, along with a significant increase (3.3%) in newspaper subscription prices.


Newspapers losing classified ad revenue also experienced an overall decrease of 4.4% in their circulation and a 3.1% drop in display ad rates. Those papers were also less likely to provide online content.


"Our study demonstrates how media companies respond to shocks from technologically disruptive entrants in different industries," Robert Seamans, assistant professor of management and organizations at the NYU Stern School of Business and the study's co-author, said in a press statement.


Seamans also noted that advertisers can now reach consumers across a variety of media platforms, thanks to new technologies, while the lines between different media industries are being redrawn.


With that in mind, he said, the study should provide "some insights to media moguls who will face future industry shocks and are pushed to re-evaluate their business models."


More on moneyNOW

16Comments
Aug 15, 2013 12:22PM
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It should read"Craigs list allows consumers to keep billions in their pocket".
Aug 15, 2013 12:31PM
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What this article NEEDED TO SAY IS... that if newspapers had stepped up and became THE source for job postings and validated fulfillment, they'd still be in business and thriving. Instead, they blame Craigslist and not Lack of CareerBuilder and Resume Black Hole Monster for ruining America with the jobs blockade. Next we'll hear JC Penney and Sears suing Garage Sales for undermining retailers.
Aug 15, 2013 12:22PM
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A big reason many private and occasional sellers have abandoned daily newspaper classifieds is the cost. An item may sell, or maybe not, but the bill is a 'for sure.' Also setting fees based on item price is frustrating, especially on no-sale high ticket items; it should not matter what one is selling when buying 2 or 3 lines of ad space.

Many have not turned only to CL (just one of the many Interweb no cost options), but weekly 'hard copy' publications like the Thrifty Nickel / Penny Saver type papers found free at the grocer or gas station as viable alternatives. The local buy/sell/trade paper is thicker than ever in our area, and a great resource that is largely free of scammers and nuisance marketers.   
Aug 15, 2013 1:44PM
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And Henry Ford drove a stake in the horse and buggy makers too.

 

Newspapers sat on their hands the whole time craigslist was ramping up.  Instead of adapting to a new competitor, the newpapers continued charging exhorbitant ad rates with their near monopoly product.

 

The newspapers got exactly what they deserved.  And consumers saved billions of dollars that they could use to spend elsewhere.

Aug 15, 2013 12:03PM
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No surprise. I have advertised for employment in my local news paper (AZ REPUBLIC) classified section and received no response at all. When we advertised in craigslist for the first time we received nearly a hundred responses.
Aug 15, 2013 12:08PM
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Definition of building a better mousetrap in my eyes.  No reason to stand still and become stagnant - where would we be if we did not have new ideas?

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I advertised a used car Tuesday at 4pm on CL

 

Wednesday it was sold and gone by 8PM

 

Over ten people contacted me in one day...

 

All for free..... Do the math.... Zero plus zero is still zero and thats what it cost me on CL

Aug 15, 2013 12:05PM
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Interesting timing on this story. A couple of big headline newspaper buyouts then this.
Aug 15, 2013 5:13PM
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Newspapers practiced arrogance and stupidity, a killer combination.  They once were the only game in town.  They got competition they thought wouldn't last.  They raised their prices and reduced the size of their product.  On-line advertising was free or low-cost and more effective.  Tough decision who to go with?

 

In the early days when motor cars would break down, the horse industry would say, "Get a horse!"  We know who won that battle.  Innovation and technology eventually do prevail  Farewell to the newspapers we have known and loved.

Aug 15, 2013 3:57PM
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out with the old, and in with the new...if you don't like it get a "real" job like me. (One where you actually have to work).
Aug 15, 2013 11:50PM
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Craigslist would not have caught on if the newspapers did not charge such exorbitant fees for classified ads.
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