How newspapers could have stopped Craigslist
Earlier this month, the CUNY Graduate School of Journalism announced that Craig Newmark, he of Craigslist fame, had donated $20 million to the university, and that, because of this donation, it would be changing its name to the Craig Newmark Graduate School of Journalism.
This isn’t the first time Newmark has made a donation to a journalistic institution; in 2017 alone he gave $1 million to the investigative nonprofit Propublica and a half million to the International Center for Journalists. And as is often the case when a major donation is made in his name, journalists can’t help but point out the supposed irony that the grim reaper of journalism, the source of all its woes, is being heralded for his contribution to the industry.
“This is a generous and welcome gift!” tweeted financial columnist Felix Salmon. “But it’s utterly bizarre to name a journalism school after the man who almost singlehandedly destroyed local newspapers.” Another journalist urged us to “not forget that Craigslist destroyed local journalism by siphoning off all the classifieds.”
First, it’s worth acknowledging that Craigslist did play a disruptive force within the newspaper industry. A 2013 study from two business school professors found that Craigslist cost the newspaper industry $5 billion between 2000 and 2007 in lost classified ads. A separate study, this one from the Pew Internet and American Life Project, found that classified advertising fell by $7 billion between 2005 and 2009.
But, as some have argued over the last several years, it’s absurd to demonize Newmark for a form of disruption that would have occurred regardless of whether Craigslist ever existed. Back in 2016, Politico media columnist Jack Shafer explained how, in the pre-internet era, newspapers had established local monopolies, allowing them to jack up classified prices to absurd levels; this competition-free environment resulted in a nearly unheard-of 30 percent profit margin within the industry. There was no way those margins would sustain themselves once the internet came along and drove distribution costs down to virtually zero. “Against this backdrop,” wrote Shafer. “Newmark was an inevitable force, but no villain.”
Not only did Craigslist’s free option gut a lucrative revenue source for the newspaper industry, but it was newspapers’ dependence on that very revenue that made it impossible for them to adapt to a changing environment. “Newspaper executives absolutely saw the threat,” argued journalism professor Aron Pilhofer. “They just didn’t (or couldn’t) do anything about it for the same reason that any incumbent industry seemingly sits there waiting to be disrupted: The profit margins of the old thing were just too good.”
But let’s pretend for a second that, back in the early 2000s, newspaper executives had not only recognized the threat of Craigslist, but also possessed the willpower to introduce radical changes to their business models that would, in the short term, have threatened their obscene profit margins while also insulating them from long term disruption. Was there anything they could have done differently?
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To answer this question, it helps to understand why Craigslist was so successful in the first place. Most assume it was because it offered a free alternative to an overpriced product. And to be sure, classified ads were overpriced. Jack Shafer, in his defense of Craigslist, detailed what happened when The Washington Post became one of the only newspapers in the DC area to offer classifieds:
The closure of the Washington Star provides the best illustration of how newspapers put the screws to their classified customers. Just before the Star folded in August 1981, the Washington Post was charging $2.85 per line in the daily newspaper for one time display. It didn’t take the Post long to raise the rate. By January 1982, the line cost $3.15. By January 1984, it was $3.65. In 1996, as the commercial Web began its ascendancy, a line cost $7.93, considerably outpacing inflation.
But the price differential was only part of the story. Craigslist didn’t just offer a free product, it loosened a newspaper’s tether to its local community. When a Craigslist vertical entered a new city, its relationship with its users went beyond the mere transactional. It became a source of user generated content, a vehicle for finding love or a new tennis partner, a venue for entertainment.
A Craigslist site began vacuuming up the mindshare of the local community, and that mindshare was worth far more than any classifieds market. Once a newspaper lost its stature as the connective tissue of a city, then its fate was sealed.
So what could have been done differently? Newspapers should have accepted the internet’s disruptive force and succumbed to it. And by that I mean that, the very moment Craigslist entered a particular city, that city’s newspaper should have launched its own free online classifieds sections.
At that early juncture, the newspaper would have still had a stranglehold on the local mindshare, and Craigslist would have struggled to gain a foothold within that community. A local newspaper was likely the most-trafficked website in a particular city, and so its home field advantage would have surely staved off an invading website that needed to build a local userbase from scratch.
But if a newspaper converted a lucrative product into a free one, wouldn’t that have destroyed its business model anyway? Not necessarily. It could have:
- Continued to charge money for classifieds that appeared in the print version. Plenty of businesses and individuals would have gladly paid for the additional distribution.
- Charged money for certain classified categories. They could have allowed free listings for those users looking for romance or to sell household items while continuing to charge employers for job listings. In fact, Craigslist employed this very model to make money.
- Charged for more prominent placement. The problem with a free classifieds website is that your listing quickly gets buried underneath a mountain of other posts. A newspaper could have charged money for a poster to “pin” their listing to the top of an otherwise reverse chronological column.
- Sold display advertising. A free classifieds section would have allowed a newspaper to remain the most-trafficked website in the city, and more pageviews would present a newspaper an opportunity to sell more advertising.
To be sure, nothing I describe above would have resulted in a newspaper retaining its 30 percent profit margins. But that’s what happens when you lose a monopoly on distribution. I firmly believe, however, that a free classifieds strategy would have allowed newspapers to stave off new entrants and strengthened their connections within the communities they served.
Sure, it wouldn’t have stopped the Yelps, the Facebooks, the Google Maps, or any of the other myriad tech platforms that have vacuumed up local ad dollars over the past decade. It also wouldn’t have prevented the Great Recession, which probably caused a greater hemorrhaging of ad dollars than all these platforms combined.
But launching a free classifieds section would have afforded a local newspaper a moat, one that wouldn’t have been easy to traverse for most new tech entrants.. More important, free classifieds would have afforded that newspaper more time to adapt to the larger disruptive forces that the internet shepherded in. If nothing else, it would have prevented us from pretending that Craig Newmark is the bogeyman who singlehandedly killed an entire industry.
Instead, we would have had to find a new villain to blame all our woes on. Given how up in arms media companies have been over Facebook’s recent algorithm changes, I think Mark Zuckerberg would have been the perfect candidate.
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Simon Owens is a tech and media journalist living in Washington, DC. Follow him on Twitter, Facebook, or LinkedIn. Email him at simonowens@gmail.com. For a full bio, go here.
