If there is a consensus truism about the decline of the newspaper industry, it is that the slow death of a once-lucrative print classified franchise is the biggest culprit.
Not so fast, McClatchy CEO Gary Pruitt told investors and analysts Wednesday morning at the annual UBS Global Media Conference in New York. Classifieds are recovering faster than other segments of the company’s advertising base, Pruitt said, and should be a healthy business for years to come.
How’s that? Pruitt cited a series of changes and strategies that are beginning to pay off.
Classifieds have been migrating to digital formats over the last several years. More than half of McClatchy’s employment classifed income, Pruitt said, is now from the digital version.
Rates for online classifieds are pulling even with those for print, again with employment ads the leading edge, Pruitt said, and may pass them in another year or two.
Only 7 percent of the company’s classified revenues come from the traditional two- and three-line text ads. Besides the migration to digital, much of what counts as print classifieds is display advertising in the classified section, especially from car dealers. (Paid obits and legal notices help, too).
Rates for local online ads are running three to four times those for national advertising, Pruitt said. The targeting is better and there is less of the excess inventory that has kept generic online advertising so cheap.
McClatchy has doubled its bet on the transition of classifieds to digital with equity stakes in several major national services. It owns 14.4 percent of CarrerBuilder, 25.6 percent of Classified Ventures and 33.3 percent of Homefinder. Classified Ventures, whose main brands are cars.com and apartments.com, will pay McClatchy a special dividend of $20 to $25 million by the end of the year, the company has announced.
Pruitt added one caution: A number of national Internet companies want in on the local action, and directories like CitySearch and Yelp remain formidable competitors as well. So there will be more pressure soon on both share of market and rates. “The majority of the secular shift is behind us,” Pruitt said, “but there is a little more to go.”
All told, digital now accounts for 18 percent of McClatchy’s total advertising revenues, and that is without the boost of freestanding businesses like the New York Times Co.’s About.com or Gannett’s Point Roll and Captivate.
McClatchy, like most of the newspaper companies presenting this week, is operating profitably and using a big share of those earnings to pay down debt. And like the other companies, it is not making any promises that revenues, currently declining about 5 percent year-to-year, will grow in 2011.
“I can’t tell you when we will go positive,” Pruitt told a questioner, “but we think that we will.”
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