This content is classified: from The Bulletin 1999

When Lachlan Murdoch says the Internet is having an effect on classified advertising, it is time to believe some of the hype from an industry that's never short of a boast. The chairman and CEO of News Ltd was reported expressing this view following his company's annual general meeting last month.

He followed these comments by saying that his organisation is focused on the matter. This is probably an understatement. Murdoch's News Interactive division is one of Australia's leading Internet content providers and already has a substantial on-line advertising operation.

News Interactive may not be making money at this stage, but for now staking out turf in cyberspace is more important. Even so online success for News is hard to define. There are reports that the organisation's on-line Information Technology recruitment advertising is stealing copy sales from Tuesday's Australian. That may be desirable in the long term, right now it is a problem.

While Murdoch argues that television stations have more to fear, there is evidence newspapers will find the going tough. In mid-October, Mark Webber, vice-president of classified marketing groups at the Minneapolis Star Tribune described his paper's performance to delegates at the Pacific Area Newspaper Publishers Association. He said his paper's classified revenue grew 20% in 1997. In 1998, this growth was just 1%. When asked why the growth stopped, Mr Webber gestured at Harold Levy, CEO of TMP Australia and said the cause was TMP's online recruitment service, The Monster Board.

More chilling is the fate of the San Jose Mercury. Based in Silicon Valley, the Mercury is America's top newspaper for computer industry recruitment. Last year, the paper suffered a 40% fall in classified recruitment advertising revenue. Given that Australia is about a year behind US in Internet advertising trends, from New Ltd's point of view, the worst may be yet to come. Or is it?

Australian publisher profits online

At least one Australian publisher has profited through the transition from print to electronic publishing. Roderick Mcallery is a director of Commercial Dynamics, which publishes the Trading Post group of papers. Mcallery said, "the Trading Post site succeeds because it offers better utility than other classified web sites. Our base content is better. Suppose you want to find a Mazda 323. Search other sites and you might find ads that feature 20 cars from a single dealer, where only one is a Mazda 323. With our car ads, the rule is one advertisement, one car. Which means the same search on Trading Post will only deliver Mazda 323s."

He said another advantage is that Trading Post ads are costed by the word, while big papers charge by the line. This means his advertisers tend to use fewer confusing abbreviations, making the entries easier to understand. At the same time, the Trading Post insists that advertisers indicate location and price information. The result Mcallery said is a content delivery system designed for speed and to ease the search process.

In other words, Trading Post works because it has approached classified advertising from the customer's perspective. In this case customers are advertisers and potential buyers.

Industry gossip says Commercial Dynamics is the only company currently earning substantial revenues from Internet classifieds. The truth of this statement depends on how you define Internet classifieds.

Australia's Most Successful Websites

According to Marc Phillips, author of 'Australia's Most Successful Websites', the key to profitable Internet publishing is to discard conventional publishing business models. Phillips is a director of APT Strategies an Internet monitoring organisation that publishes Australia's online readership survey.

He said, "Traditional newspapers make their money from a single revenue stream. The cover price barely pays for printing and distribution; the real money is in advertising. On the Internet, where distribution costs are lower, companies make their money from multiple revenue sources."

Phillips offers the traffic deal between travel.com.au and Yahoo!, the popular site directory, as an example. Like all such deals, the specifics are confidential, but generally traffic deals involve paying a percentage of the final transaction or a fee per visitor delivered to the site. He said, "These guys are all leveraging their eyeballs off to get e-commerce revenue".

And there's the rub. While the Trading Post's content lies in information rich advertising, other media organisations like News Ltd, Fairfax and Kerry Packer's PBL have to find leverage from other content assets. And it appears that, in some cases at least, they are already getting the message. In PBL's case, leverage works across traditional and online media. A television viewer watching say, Channel Nine's Getaway program, can be delivered to the Getaway pages on the NineMSN website. Once there, they don't just view travel advertisements, they can actually book and pay for their trip. There's imply no equivalent of this process in traditional media.

So, this Internet sales model works thus: publishers offer worthwhile content to attract visitors. Once they reach the site, they are offered a variety of ways of generating revenue. This variety is important. Phillips says his online readership survey found that 28% of people browse online, but purchase offline. They might use the Web to compare prices or product specifications. Only 21% had actually purchased online.

Marcello Silva, national interactive manager for TMP Worldwide agrees that content is the key. Silva, who has responsible for The Monster Board in Australia, describes his product as a globally branded career management operation. He says to compare the Monster Board with online classifieds misses the point. The Monster Board is a one-stop shop where recruitment advertising is just a single element in a complex mix that includes a lot of advice.

Silva said, "TMP trades on NASDAQ, its value rises and falls with the technology sector. Our vision is to become the online global hub for career management. We've tailored our service to give people a helping hand as they progress from their first job all the way to the boardroom." Clearly, TMP is a long way from newsprint linage ads, yet it is still seen as part of the online classified scene.

Melbourne-based Matthew Rockman is a director of Seek Communications, which operates a web site featuring job advertisements from some 200 recruitment companies. Seek competes with TMP, but approaches the market from a very different perspective.

Rivers of gold pour through classified advertising

Like many other Internet entrepreneurs, Rockman's sights are set on the fabled rivers of gold that pour through the classified advertising departments of Australia's major newspapers. He says that traditional publishers like News Ltd and Fairfax are in the Internet market because they have to be. "They don't want to be here, they only want to protect their profits".

While TMP is vertically integrated, Seek Communications is aiming to own a horizontal slice of online recruitment by opening a marketplace where job seekers can interact with recruiters. Rockman said with some 4800 current vacancies, his site offers the greatest range of Australian jobs. He said job seekers will be attracted to the site simply because its where the most jobs are.

Right now it seems that some Australian publishers are still grappling with basic business models. Meanwhile, a new threat to the traditional classified has appeared in the US. New sites like eBay have been described as classifieds on steroids. They let users provide their own content in a seemingly anarchic online swap meet. If they take off here, Lachlan Murdoch won't be the only media executive noticing an 'Internet effect'.

This story first appeared in The Bulletin in 1999.