Put 'Em Up!

Newspapers must post their classifieds on the Web immediately or risk losing them to high-tech competitors. Here's how.

by Andrew Bowser

As of July 1, only 407 of NAA’s 1,015 member dailies offered some form of online classifieds—up sharply from 325 in January, but still "unbelievably frightening," as one speaker at the Association’s June classified conference put it. A variety of factors explain why more than half of member papers have yet to take the plunge, but publishers can no longer blame the complexity of the technology.

"This is not rocket science anymore," says NAA Director of Real-Estate Advertising and Online Classifieds Kevin McCourt. "There are very elegant, cost-effective solutions to put classifieds online for under $100 a week. Even the smaller newspapers are looking at it and saying it’s not a bad investment."

The stakes are huge. Thousands of companies are trying to take some of the $16.8 billion classified market away from newspapers. By 2002, predicts Jupiter Communications, that figure will rise to roughly $20 billion, almost 10 percent of which will be spent online.

By NAA estimates, more than 2,400 World Wide Web sites offer some form of classified-style listings, be the focus employment, real estate, automotive or merchandise. Even the federal government has emerged as a formidable competitor. Last spring, the U.S. Department of Labor spent $8 million renovating its America’s Job Bank recruitment site, which in June boasted nearly 700,000 positions and 75,000 résumés, and logged more than 48.5 million hits.

Analysts at Forrester Research say such vertically focused "category killers" will dominate online classifieds. With vast databases and strong, nationally recognized brands, aggregators like MonsterBoard and CarPoint are combining product information, company profiles and useful tools like mortgage calculators and blue-book databases into unbeatable consumer-resource packages.

In response, newspapers are now cobbling together Web-based verticals of employment, real-estate or auto listings to complement existing online classifieds; some merge their existing ads with auto-dealer inventories or local multiple-listing service databases. Others ally with national or regional networks that hope to rival the reach of the CarPoints and Classifieds2000s of the online world.

How serious is the threat? Consider the following:

• Unisys Corp., which used to spend about $2.5 million a year on newspaper help-wanted ads, has stated it would pare that budget to $1 million. According to The Wall Street Journal Interactive Edition, Internet recruiting costs less than $1,000 per hire for the technology giant, compared with "several thousand" for print ads. Unisys isn’t alone. Texas Instruments expects Web advertising will snare 15 percent of its specialized U.S. hires in 1998, up from 10 percent last year.

• Advertisers now making the online jump overwhelmingly favor new niche players over traditional media. More than 90 percent of online auto advertisers, for example, rely on emerging sites, while just 10 percent advertise on Web sites run by traditional media, according to Forrester.

• Forrester predicts that 80 percent of auto dealers will advertise on the Internet by 2002, yanking money from newspaper and radio ad budgets to support their online expenditures. Real estate agents and employers are sure to follow suit.

"One employer told us he spends $50 on Career Mosaic to get the same exposure as a $7,000 ad with the Chicago Tribune," says Forrester analyst Bill Bass.

Classified managers may be enjoying a bit of the "fat and happy" syndrome at this point. Classified expenditures rose to their current $16.8 billion level from $15.1 billion just a year ago. Despite distant rumblings, it’s still hard to find a paper that can attribute any classified erosion to online competitors.

Peter Zollman, the principal of Advanced Inter active Media and author of an on-going series of NAA online-classified reports, says he has spoken with classified managers and new-media directors at perhaps one-fifth of all U.S. dailies. Not one spoke of any negative impact on print classifieds caused by the online upstarts—yet.

"What is true now is not necessarily going to be true in six months or a year," Zollman cautions. "I fully expect the print-classified environment to get much tougher."

The good news? Newspapers’ online-classified technology is maturing quickly, giving publishers a chance to stake a claim on the Internet before the boom turns bust for print-side advertising.

Front End to Frontier

Moving from print ad to Web ad still requires some forethought and programming acumen. The extraction process varies by newspaper, but generally begins by stripping proprietary markup formats from listings. Database attributes—such as mileage on a car or the number of bedrooms in a house—are then extracted from the raw listings so they can be searched by Web users.

Early adopters coded their way onto the Web, fashioning PERL scripts or other programmed means to port ads from often creaky front-end systems into HTML and onto the Internet. The Boston Globe’s boston.com uses a classified-ad listing-and-search program built in-house using Verity Inc. technology as the underlying search engine. Internet Software Development Manager Richard DeFuria says boston.com staffers have written scripts that take ads from the Globe’s legacy system, clean them up and parse them into a searchable format; he says any paper with an adept technical staff can come up with a similar solution.

"There’s a fair amount of initial effort to get it up and running, but it’s not even overwhelming," he says. "If you are familiar with parsing and PERL, it’s not that big an effort." Recently, developing a "market basket" application to display the Globe’s merchandise classifieds online took the resources of just one programmer with one object-oriented parser, building on the existing functionality built up for the site’s other classified categories.

Parsing, however, can be a tricky business. Consider that a "bubbler" is a water fountain in Rhode Island, or how many ways classified reps can misspell "Buick LeSabre." In addition, parsers have to be able to digest data relationally, ensuring that they spit out "3-2" as the number of bedrooms and baths and "1-4" as the hours of the open house on Sunday. Parsers, offered by a number of software vendors, use extensive sets of rules and synonym tables that can transform millions of text ads into precisely searchable data fields with a minimum of human intervention.

Many of the precise technical hows and whys have become nonissues, thanks to a spate of products from suppliers who offer off-the-shelf (or easily adaptable) packages to make that leap. Vendors typically require newspapers to rescript their output to meet or at least closely approximate a particular format, which is then e-mailed or FTP’ed to the vendor’s server, where it is parsed into searchable form. The vendor path works especially well for smaller papers without the resources to keep up with the rapidly rising bar of Internet classifieds.

Step-Wise Solutions

Suppliers of online-classified applications fall into three general categories:

• Those who provide tools for newspapers to keep every function in-house (i.e., Edgil Associates Inc. and FutureTense)

• Those who let newspapers manage ads but take over many of the technical issues such as databasing and hosting (i.e., Thomson New Media and Electric Classifieds Inc.)

• Those who can do everything for you, from hosting to regional or national ad aggregation (i.e., AdOne Classified Network and AdQuest Classifieds).

Despite the fact that they can handle the entire online-classified process for a paper, AdOne, which now aggregates ads from 400 daily and weekly titles under its new consumer-friendly brand Classified Warehouse, claims to be a "tools-agnostic" solution. Papers can purchase AdOne’s do-it-yourself site package, or post to the company’s national-ad network. Still others fuse in-house classifications like "Unfurnished Apartments—Bronx" with AdOne’s core search criteria.

Another do-it-all vendor is PowerAdz Corp., which recently merged with AdQuest Classifieds (see story, p. 5). PowerAdz employs inventory-gathering technology to help auto dealers pull lot listings from their databases, then translates the data to normalized fields that can be searched using such criteria as make, model or mileage. The dealer inventory can be meshed with regular auto listings or kept separate. Proactive papers can reformat the templates or write their own HTML. Data can be exported into other forms, and some clients are reportedly devising automotive shoppers based on the content from their PowerAdz-driven sites. "We facilitate communication between the car dealer and newspaper," says PowerAdz Chairman Bob Godgart. "The more we can build that conduit, the more successful newspapers will be online."

Some of these vendors are keen on moving away from a hard-wired world where newspapers are locked into one supplier’s applications. Alan D. Mutter, president and CEO of Electric Classifieds, says the next generation of his company’s online-classified applications, beta tested and going live in September, gives newspapers "complete control" of the online classified and associated e-commerce environment.

"The ideas are bubbling up fast and furious, and newspapers feel handcuffed by the technology," Mutter says. "They are very frustrated. They see elegant, functional and compelling sites from Web companies, [and] they are not getting that." He likens the new ECI environment to a house set up with sinks and other standard fixtures, but also hookups to support Jacuzzis, barbecues and other appliances—some that haven’t even been invented yet.

For the past several months, Edgil has been revamping its base on- line classified-advertising product, WebCentral, to add interactivity between buyer and seller and other state-of-the-art features, according to Vice President of Sales and Marketing Linda Gagnon. Newspapers can add features like video, faxback response, or whatever else the online business model demands.

Yet even if new technology from ECI, Edgil or others proves to be cutting-edge today, it’s up to newspapers to ask where that system will be when the technology turns over yet again. Even Mutter admits his company’s previous offerings now feel hard-wired, monolithic and closed—all attributes that don’t fit well in the plug-and-play world of Internet applications.

"This six-month product lifespan is not going to stop for another five years, at least," says Christopher J. Feola, director of The Media Center at the American Press Institute, who recommends focusing on business models above technical issues. "Newspapers need to find out who their community is, figure out what’s unique that can be offered to that community, then go out and buy the best software—and be ready to discard it at a moment’s notice."

Regional Reach

National or regional networking is available by signing with niche players like AdQuest or AdOne. Both have won contracts with newspapers and groups all over the country by touting hard-to-argue-with benefits, such as making money online instantly with minimal upfront cost. Many of these benefits spring from value added by "aggregation"—combining classified ads from a number of newspapers into one large, Web-searchable database.

"At the end of the day, it’s important to have regional reach, because that’s how people shop," says Richard Bassler, AdOne vice president and general manager. "The boundaries are not necessarily those the print papers have defined."

AdQuest’s growth illustrates how quickly newspapers have taken to the aggregation concept. Launched in 1995, AdQuest started with a few dozen clients and plateaued at about 200 in 1996. Then growth in 1997 was 87 percent, followed by 107 percent growth from January to August 1998, bringing the grand total to 585 daily and weekly newspapers and 120,000 ads served per day. "This is an industry that understood two years ago it needed to do something," says General Manager Lamonte Rhoades. "It’s now defining and requiring specific business models that make it money."

Likewise, InfiNet, the Gannett Co.-Knight Ridder-Landmark Commun-ications joint venture, continues developing its aggregation efforts and currently serves 1.6 million-to-1.8 million ads per week, according to Vice President of Product Development Gary Culbertson. The Inland Press Association has endorsed InfiNet’s Classifieds Online product, which includes InfiNet’s aggregated database. Thirty IPA members, some of which publish multiple newspapers, have joined the InfiNet fray.

Climbing to the top of the aggregator heap is Classified Ventures. Following in the footsteps of pioneering newspaper-employment advertising aggregator CareerPath.com, which now boasts nearly 70 metro affiliates, Classified Ventures has partnered with seven media powerhouses including Gannett, Knight Ridder and The New York Times Co. Together, the media companies’ affiliate newspapers have a daily circulation of 17.4 million and a Sunday circulation of 21.4 million. Besides distribution through the resources of more than 130 affiliated newspaper sites, Classified Ventures has distribution agreements with third-party providers such as America Online. More national-distribution and promotion deals are expected.

Jupiter Communications says that the company is poised to dominate the auto, real-estate and apartment-rental verticals. "With the inclusion of The New York Times, The Boston Globe and 18 other papers, Classified Ventures has turned up the heat on its competitors and has created a formidable barrier to entry," Jupiter analysts wrote in a recent market study. The consortium may even beat out Microsoft, the analysts predicted: "Even well-capitalized, nontraditional players such as Excite [Classifieds2000], Cendant [Rent.net] and Microsoft CarPoint must determine whether they can realistically challenge the deep pockets and marketing reach and muscle of Classified Ventures, or whether it makes more sense for them to seek an exit strategy."

Hugh McGuran, online advertising manager for Philadelphia Newspapers Inc.’s Philadelphia Online, says the Classified Ventures brands, particularly Cars.com, will help papers entice local dealers with the promise of national exposure. For participating dealers, Cars.com extracts the entire lot inventory and renders it searchable. "Newspapers finally have it right," McGuran says.

Should aggregation be the only choice? The Corpus Christi (Texas) Caller Times severed its ties to AdOne and built its own online-classified presence using only two people. Though happy with AdOne’s service, Caller Times execs weren’t convinced of the value of aggregating every ad nationally. In any case, simply cutting out revenue sharing more than covered development costs within the first month.

"The idea is to create a local marketplace—somewhere people can come to easily find what they’re looking for," Vaughn Hagerty, the paper’s chief information officer, wrote in an article for NAA’s The Digital Edge.

The Standards Search

Despite newspapers’ successful aggregation efforts, shuttling hundreds of thousands of ads to a central server isn’t yet automatic. And while some suppliers say they have written scripts to convert data from 90 percent of U.S. front-end systems, it can still take up to four weeks to gear up the system for any particular newspaper.

What would change that is a universally accepted standard for formatting online classifieds. After three meetings, an NAA-organized task force is hashing out proposed standards to do just that, and preparing to deliver its final data sets. The hope is that these standard sets—one each for real estate, employment and autos—will help newspapers control their online destiny by giving them the tools to freely and easily move ads from one place to another, be the destination a nationally branded aggregation partner, a hybrid database of print classifieds and inventory listings from auto dealers or Realtors, or even a consortium of newspapers partnering on a single site.

The ultimate goal is to make classifieds more powerful. If everyone can agree on the basics, then Web-based searching will be more precise and sharing ads will be easier—facilitating regional or national aggregation.

The file format, when completed, will provide a mechanism to mark each data item. In addition, it will be database-friendly, based on a hierarchical structure that’s supported by commercially available software tools, and easily adaptable to multiple target media. In addition, the format will contain standards for header and interval markup, based to some extent on the CREST and electronic-data interchange formats developed by NAA.

The standards are being crafted from Extensible Markup Language (XML), a variant of SGML that, through specialized tags, allows for superior control of content and how it’s presented. More robust than HTML and simpler than SGML, this file format can provide a common syntax for structuring data according to content and meaning (TechNews, March/April 1998, p. 21).

Syntax rules for a common XML tag set are called Document Type Definitions (DTDs), which define what tags can be used in a document, the relationships among tags, which tags are nestable, and more. "In essence, the DTD is an agreement between people exchanging documents on how they will use XML to describe a common document architecture," says Barry Goldberg of Zedak Corp., which has developed a prototype online ad-markup standard for The New York Times and is participating in the NAA task-force efforts.

It’s hard to argue that owning the standard for online-ad transmission would be a bad thing. And ownership is what newspapers will have, if the task force succeeds. But some newspaper-industry insiders are worried that the standards initiative won’t progress fast enough. "For a standard, being second to market can be just as good as not making it to market at all," says Feola.

The standard may not be adopted by everyone overnight, but many newspapers and vendors are fully ready to embrace it. Tony Witek, managing director of Thomson New Media, for example, says not having to worry about digging search criteria out of text will free up his time to develop "neater, cooler" search engines.

Bells and Whistles, Or Bread and Butter?

Search engines aren’t the only tools that promise to be neater and cooler in the not-so-distant future. Take, for example, natural-language processing. Look for systems within the next five years that replace HTML check boxes and buttons with an agent that essentially asks, "What can I do for you?" In real estate, that might mean a user could type in "I’d like a ranch-style house in the Milwaukee area with an office, a big yard and enough play space for my three kids," and instantaneously get a list of houses that meet those criteria. Thomson Technologies, another division of the $6-billion Thomson Corp., is spending R&D money on that project right now, according to Witek.

Almost all suppliers are focused on adding new features designed to lure consumers and keep them coming back for more. "A lot of the value we add will come not only from keeping up with the Joneses of AutoConnect or CarPoint, but from integrating products across many dimensions, allowing [newspapers] to create a more powerful and compelling site," says Zip2 Corp.’s Bruce Gallaher, director of marketing.

AdQuest has added display-ad support, banner ads, automatic placement of logos and photos, and links to advertiser URLs and e-mail addresses. Coming soon is support for online video and audio, as well as add-ons that will make it possible for surfers to pay for classified merchandise. "All the things we have done were at one point bells and whistles," says Rhoades. "Now they are necessities."

Auctions have proven to be another hot e-commerce application, and some say online auctions may be the next 900-personals supplemental revenue stream for newspapers. Expect newspapers to have access to prefab auction applications from companies such as Times Mirror Co.-owned Auction Universe (see story, p. 19) and AdQuest, which is set to launch an application that sets up newspapers as the auctioneer/collection agent.

Also look for new forms of interactivity, such as virtual home tours. Or résumé-matching services that provide employers with a cherry-picked batch of résumés that best meet their job specifications, much like Edgil’s Recruitment Center product. Jim Todesco, classified online-advertising manager for Cox Newspapers, thinks résumé matching may help papers sell recruitment ads beyond Sunday, as employers start to realize that longer exposure on the Web translates into a larger pool of qualified applicants.

The Display-Ad Dilemma

Classified display ads remain the missing online link. Even suppliers admit that nobody has come up with a completely foolproof automated solution for display ads (one wrestled with a scanning technology for more than four months before scrapping the project altogether). Some of the difficulty is related to parsing out the meaning of certain display ads, which tend to be more creative and idiomatic than the typical liner. Punny phrases such as "we give you a brake" tend to confuse even the most savvy of parsing applications.

A few technology solutions are emerging, but some papers are foregoing display ads completely, at the risk of incurring the wrath of ad agencies and recruiters. The crux of the issue is whether migrating display ads to the computer screen represents value added to the reader—or a questionable use of technology, akin to migrating radio ads to television.

An increasing number of papers are outsourcing display ads to companies such as Multimedia International, which specializes in all types of data transfer but is now calling display-ad conversion its number- one priority, and Harvest Data.

Thomson New Media is developing a technology that extracts text from an EPS file while converting the whole ad into GIF or JPEG format. An associated thumbnail image is linked to the text, which is then combined with the rest of the plain-text ads. Web surfers can read the text and click on the thumbnail to see the full ad.

Display-ad conversion headaches may pass as the software used to create the ads in the first place gets better at formatting and unformatting Web content, but don’t hold your breath. "Here we are after three years of Web-development software, and it’s still a little cumbersome," grouses Philadelphia Online’s McGuran. "Even the first versions of page-layout software like Pagemaker and QuarkXPress were easier to use and more intuitive than current HTML software. If you want to put together a car ad [from a display ad], there’s grunt work involved."

The Time Is Now

Indeed, grunt work is one of the few constants in the rapidly changing world of online classifieds. But one of the few certainties is that today’s concerns about display classifieds and other online bugbears will soon seem quaint and outdated. Another certainty is that newspapers still have time to lock up their local online markets for real estate, help wanted and automobiles if they deploy technology that gives them the edge in securing relationships with local advertisers—and forging new ones.

"From a technical standpoint, newspapers will have to come up with universal systems to make lots of new products and services work," says Zollman. "That is a difficult and complex task, but over time, it will not only be essential, but as important to the newspaper as keeping its press rolling."

Andrew Bowser, a regular contributor to TechNews, can be reached at andy001@usa.net.

TechNews Volume 4, Number 5: September/October 1998

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