Posted by: Rob Hof on April 27, 2005
This should be scary for newspapers, if they aren’t scared already. McKinsey consultants Luis Ubinas and Jochen Heck warn (free registration required) that newspapers could lose $4 billion, or 20% of their classified ads, by 2007. And the problem isn’t just sites such as Craiglist, which has vaporized up to $65 million of help-wanted ads in the San Francisco Bay Area alone. It’s that prices for these highly lucrative ads are dropping thanks to the online competition.
Is there any reason to assume that the erosion will stop at classified ads? Don’t think so. After all, Google has just started testing display ads. The first shots may have been fired in classified ads, but traditional publishers may face a longer, bloodier war of attrition than they realize.