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- Lauren Rich Fine
Managing director, Merrill Lynch - David Hiller
Publisher, Los Angeles Times - Scott Moore
VP content operations, Yahoo! - Craig Newmark
Founder, craigslist - Eric Schmidt
CEO, Google
You invest at 200 because you think it's going to 250; the fear today is 200 can go to 150, and that's your fear as an investor. Newspapers generally, at one point at their peak, they were generating close to 70 percent of their pretax profits from their classified advertising: help wanted, real estate and auto. Today a good portion of help-wanted classified has gone online, a lot of it with newspapers. ... Real estate is going online; auto is going online. ...
I have kids in their 20s, and they and all their friends don't even know what a classified ad is. They all go to craigslist.
But they should. What's fun about reading microscopic print in the paper that isn't organized in the way that you think? I mean, if you're looking for a job, it's just not that helpful to do it in the paper. But if you go online, whether you go to Monster, craigslist or anywhere else, if it's done well, you can read about the job. Typically, there's something there that will take you to the Web site of the company that's offering the job. You can read about the benefits. You can go to Yahoo! Maps and figure out if you like the commute. ... Then you can submit your résumé, and you've never left your desk.
If you're looking for real estate, seeing the ad in the paper is one thing; going online and doing a virtual tour, looking at the taxes of that neighborhood, figuring out if the schools are bad or good. It's just amazing what you can do online. That's ultimately why the newspaper industry is under pressure. Classifieds are better online, period.
So what's a newspaper to do, roll over and die here?
No. Newspapers have done a great job with their classifieds online. Most classified searches are local. You might go to Monster and look, but you'd probably go to your newspaper Web site, because you know they're going have much better penetration of the local community. Similarly for real estate, you can still get paid to have a comprehensive group of these listings; it is still of value. You can be the one that brings in all those other services and brings them together. ...
Did you not count on the impact of the Internet on advertising?
Yeah. We certainly knew there was going to be a big impact. In fact, part of the benefit that we were setting out to achieve by doing the combination was to get enough scale in the business that we could do good things on the Internet, including -- I mentioned building networks like we've done in the classified advertising business for CareerBuilder and HelpWanted and Cars.com, for the automotive.
You may remember at the time of the merger, people were beginning to write off newspapers in terms of the position they played in classifieds. Monster had come in and was the new 800-pound gorilla, and people said, well, newspapers were through. Well, guess what? We put together CareerBuilder, investing significant amounts of money to do it, and built a business that's now beating Monster. ...
Craig Newmark of craigslist, he feels kind of guilty, because he likes news, he likes newspapers, but craigslist is taking away their financial base, as has Yahoo!
Fair enough.
Feel guilty?
Not in the least. Craigslist is sort of a very interesting case, because Craig is not really known as a rapacious capitalist, to say the least. He, I think, saw an opportunity and just wanted to help people be able to exchange business services online. Their site is bare-bones in terms of its design and in terms of the amount of investment that they've put into it. But it serves a need. It serves a market need in a way that is very seamless. … I found two apartments in L.A. on craigslist. I also had tried to use the L.A. Times classified section and found it just unusable, because it was very confusing. I couldn't figure out which listings were from brokers versus people that owned the homes or whatever, and I was able to find places on craigslist very, very quickly.
Now, the dynamic of craigslist being free certainly does blow a hole in one of the key revenue streams for newspapers. But that's, again, an example of the creative destruction that happens when technology evolves to the point where it impacts an existing business model. I would venture to guess that the L.A. Times probably enjoyed a virtual monopoly on classified advertising five or 10 years ago. That is gone. That is just the reality of the nature of change in business and technology.
Yahoo! News is taking advantage of some of those same dynamics. But on the other hand, we have classifieds and businesses, too, where we do charge people. So Craig is having an impact even on our business now by --
So craigslist is undermining Yahoo!?
Well, yeah, at the margin, in certain categories, sure. I think you'd have to be very aggressive and bold at this point to try to go into, say, a housing classified service that you were going to charge people for. You'd either have to be very local and very good -- and there are examples of that where, by virtue of the fact that you know lots of people, you can get the best listings, and so you can charge the users, because they have the best listings -- but other than that, the free price is the market clearing price at this point for many forms of classifieds. ...
By 2000 you are going pretty great guns, things are expanding.
Yes.
Which means you are taking more revenue away, in terms of classified ads, from newspapers.
Well, it's not clear because as far as we can tell a lot of the ads that are posted on our site would never have gone to newspapers. Depending on whose opinion you agree with, a lot of the ads that aren't going to newspapers are going to sites like Monster and AutoTrader.
But it's that flight of that kind of advertising to various Internet sites, not necessarily yours, that['s] beginning to make a big impact on newspapers.
I agree. ...
Why do people buy an ad or post something on craigslist instead of going through newspapers?
Well, when you're putting something online, you have the advantage of having it appear on a site almost immediately, and if you get a lot of response from that ad fast -- and we hear people get responses to ads on our site sometimes in minutes -- when you get too many responses, you want to take that ad off right away, or maybe you want to edit it right away.
So if it's online, you can do things really fast and really effectively. What's different about our site as well is that our site operates in a culture of trust. The people on our site expect other people to be trustworthy and good, and that works out really well. ...
You basically believe that people are good?
Our experience every day is that people are overwhelmingly trustworthy and good. There are bad guys out there. There are not many of them, although they make a lot of noise, so people think there are more bad guys than there are, but I see that every day. My team and I, we go after them every day. ...
One of the unintended negative consequences of online advertising has been the loss of value in traditional classifieds. It's simply quicker, simply easier for an end user who's online, on a broadband connection, to look things up and to figure out what they want to buy. It's true for many companies. And it's really affected the economics of newspapers. This was a surprise to us. We figured people would use both.
No one has yet figured out a way to fill up all that money with a different source to help pay for the newspapers.
An unintended consequence that's happened to your content provider.
Right. And Google, although we've been part of the problem from their perspective, needs to be part of the solution. We've recently announced a trial with more than 50 newspapers where we're using our ad network to aggregate advertising from all around the country and feed it into their advertising systems so it augments their advertising sales force.