Vol. 12, No. 2,856W - The American Reporter - March 18, 2006

On Media

by Robert Gelfand
American Reporter Correspondent
San Pedro, Calif

LOS ANGELES -- Who would have thought back in 1995 that the biggest future threat to newspapers wouldn't be the FBI or the federal courts, but a guy named Craig? The craigslist family of Websites has done something to newspapers that the feds couldn't - cut into their ad revenues by giving stuff away.

For the dozen or so people who are not yet aware of craigslist, it is one of the Internet's biggest all-in-one classified ad, community bulletin-board and discussion sites. You can find job offerings for everything from lawyering to nude modeling, with opportunities for telephone sales, clerking, Internet design and filmmaking along the way. Sales ads and housing are another staple. A brief history along with visitor statistics can be found at craigslist.org.

Just as a hint of its recent growth and increasing influence, consider this statistic: craigslist claims that it gets about 3 billion page views a month from about 10 million users. That's billion with a "b" for hits.

What began as a local service by Craig Newmark in San Francisco as early as 1995 has been going big-time since 2000. What began as a small time, local electronic bulletin board has developed into a giant. In so doing, it has begun to kill off a significant part of newspaper revenue. This took a while to become apparent, but now people are starting to notice.

The Los Angeles Times took note in a Dec. 11, 2005 article by Joseph Menn, titled "San Francisco Chronicle Struggles as Internet Siphons Readers, Ads." You can dig up the whole story on the Internet, but for the purposes of our discussion, only these six introductory sentences are necessary.

"SAN FRANCISCO When Jeffrey Zalles needed a new cashier for his coin laundry in the South of Market district, his help-wanted ad in the San Francisco Chronicle brought just four responses. So Zalles posted a notice on Craigslist, a San Francisco-based network of Websites that specialize in classified advertising. His cyber-ad drew 400 applicants.

Zalles found his cashier and hasn't relied on the Chronicle since, advertising instead on the Internet and in the city's wide array of free papers. The venerable Chronicle is struggling, and defections by Zalles and other advertisers are a big reason. Classified ads are a big source of income for the Chronicle and the newspaper business as a whole, making up 27% of the industry's revenue, with 53 percent from other ads and 20 oercent from people buying the paper."

The Chronicle is a special case, in that it actually has managed to lose money, but even profitable newspapers have begun to feel the competition.

This is all part of of a larger discussion that has been going on for several years now: How can our society continue to support reporters doing what is best done by reporters - the work of investigative journalism - considering the increasing pressure on newspapers from the Internet, television and radio?

We will have something to say about this later, under "Short Takes." But first, let;s consider the enormous advantages, technical and economic, that the Internet has over print newspapers when it comes to distributing classified ads. The advantages sort into two classes, one physical, the other, strangely enough, mathematical.

The physical part of the equation is pretty obvious. Craigslist doesn't have to pay for the purchase price, maintenance, or fuel costs on the fleet of trucks it doesn't own. It doesn't have to pay the salaries, Social Security, and medical insurance for hundreds of typesetters, copy editors, telephone sales clerks and truck drivers that it doesn't employ. It doesn't have to buy newsprint by the roll or ink by the barrel.

Craigslist does have to cover the costs of gigabytes of hard drive storage, not to mention terabytes of bandwidth charges, but these are comparative inexpensive relative to the costs of distributing several hundred thousand copies of a daily newspaper.

The cost savings on distributing information electronically (at the cost of a small amount of electricity) vs physically (at the cost of diesel fuel) is enormous; it is probably only expressible in terms of orders of magnitude.

There is another side to these cost differences that I referred to as mathematical. By this, I mean the way the information is structured for delivery, and how this affects the amount of information that gets delivered.

Consider a newspaper reader who is interested in buying a used car this week and may be looking for a new apartment come August or September. He buys a copy of the local newspaper today and pulls out the classified ads. He finds ads for computers, dolls, houses for sale and rent, jobs offered, pets to adopt and so forth. The newspaper had to cover the costs of delivering to this one reader every ad, every page, every drop of ink.

Come next Fall, this same reader, looking for an apartment, will get a newspaper full of automobile advertisements along with the dolls and the dogs and finally, the rental unit he seeks.

Newspaper classified sections deliver every ad on every subject to every reader. Some newspapers have figured out how to limit some ads according to geographical zones, but this is a modest improvement, at best; after all, it serves mainly to allow advertisers to pay newspapers less money by getting less overall coverage.

Craigslist delivers information in a completely different way. When you click on craigslist.org, you get one Web page. You might think of it as a Table of Contents, or perhaps an index. What it isn't is the whole collection of ads, announcements and offers that the Internet site as a whole has available.

You get to pick what you want and leave the rest alone. Perhaps you are interested in buying something. The New York version of Craigslist (to take an extreme example) has thousands upon thousands of listings. The point is that the Craigslist computers don't download all that information to each viewer. To do so would increase the cost of doing business enormously. Instead, you pick the general category, be it motorcycles, books or jewelry, and you click on it.

In the print world, this would be equivalent to the daily newspaper including just the classified ads that each particular reader is interested in reading, no more and no less. In the physical world of newspaper publishing, this is an impossibility. In the virtual world of computer automation, it is the standard.

From the organizational viewpoint, the Craigslist approach is really nothing new. It is, for example, the way we use most Websites , by following a series of branches from one node to the next. You can imagine the whole thing as a tree, with the home page being the equivalent of the trunk and each individual Web page being some intermediate branch. On a tree, some branches give rise to smaller branches, just as one Web page may include links to more detailed Web pages. Eventually, you get to the end of the line, and find either an apple or a terminal Web page (which only links back to higher pages).

From the standpoint of economics, think of it like this: Craigslist allows you to find one apple at the end of a tree branch. The newspaper classified section delivers the whole tree.

The fact that electronic delivery of information has cost advantages over the print world is obvious. That this has serious secondary effects has also become obvious, but the ultimate extent of those effects is still in question. In any case, specialized Internet sites such as craigslist are not the same as newspapers and should not be thought of as their replacement.

The question remains: How can the newspapers adapt so as to continue to deliver investigative reporting and still survive financially?

Short Takes

The Washington Post has been on a roll of late, and lucky for us, has been giving away the product of its toil over its Internet site One bombshell of a story connects indicted Rep. Tom DeLay with indicted lobbyist Jack Abramoff through something called the U.S. Family Network, an organization that took in millions of dollars from a small, select group of donors and used the money in ways that ought to invite skepticism, to put it mildly.

This is the kind of investigative journalism that takes time, money and talent. Just read it. It's written by R. Jeffrey Smith, and is called "The DeLay-Abramoff Money Trail," and was published on New Year's Eve.

Just to whet your appetite, here is one little morsel: "... [T]he steady stream of corporate payments detailed on the donor list makes it clear that Abramoff's long-standing alliance with DeLay was sealed by a much more extensive web of financial ties than previously known... ."

The Wapo, as its fans have come to call it, has also been running detailed stories about the NSA wiretap scandal. The Jan. 1 edition explains that the NSA passed information to several other government agencies. It appears in a story by Walter Pincus titled "NSA Gave Other U.S. Agencies Information From Surveillance."

Stories such as these remind us of something that seems to be forgotten by all too many people. The source of most of the hard data that gets discussed so freely by pundits and bloggers alike comes from shoe leather journalism. It comes by collecting and reading documents, by making telephone calls, by interviewing sources.

When it all comes together, as in these stories, it;s something beautiful to behold. And it requires the kind of system that pays reporters to do that job.

That is the most serious reason for us to worry about how the modern world, craigslist and all, is treating the newspaper industry.

Copyright 2006 Joe Shea The American Reporter. All Rights Reserved.

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