Disintermediation 2.0 - InformationWeek

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Commentary
12/1/2005
02:38 PM
Tom Smith
Tom Smith
Commentary
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Disintermediation 2.0

In the dotcom bubble, a term that cropped up frequently was "disintermediation," the notion of leveraging the power of the Internet to eliminate middlemen that added little value and decreased the efficiency of a business. If you were on the receiving end of it, your business was toast. The concept is worth revisiting today in the context of the classified advertising business of daily newspapers and recent moves by tech giants. The big question: are the dailies being disintermediated in one of

In the dotcom bubble, a term that cropped up frequently was "disintermediation," the notion of leveraging the power of the Internet to eliminate middlemen that added little value and decreased the efficiency of a business. If you were on the receiving end of it, your business was toast. The concept is worth revisiting today in the context of the classified advertising business of daily newspapers and recent moves by tech giants. The big question: are the dailies being disintermediated in one of their bread-and-butter businesses?Putting aside the well-documented decline in some key aspects of the daily newspaper business -- most notably paid circulation - it must be daunting for newspaper execs to consider Microsoft and Google encroaching on their classified ad business.

In Microsoft's case, the company is testing an online classifieds service that would let people sell personal items over its instant messaging, social networking or local search services. The software vendor plans to let users offer goods or services to contacts on MSN Messenger or to groups within its blogging service. At the same time, prospective purchasers would be able to set up RSS feeds and get updates on new items being listed. Think of the contrast between opening an RSS reader that has gathered items of interest for sale, say antique furniture, vs. poring over microscopic type in pages and pages of classified ads in the newspaper. Which service would you rather be selling?

Microsoft's disclosure follows an apparent -- or widely interpreted -- move by Google that could result in a big classified ad push.

Combine that with competition from the likes of classifieds on Yahoo, and the dominance of EBay. No wonder media titan Rupert Murdoch recently declared that "I don't know anybody under 30 who has ever looked at a classified advertisement in a newspaper."

Making things even more scary for the dailies:

* The deep pockets and loyal customer bases of those who are nibbling away at classified ads -- MSN, Google, Yahoo and EBay -- to name just a few. Then there's Craigslist: a co-worker recently related how a family member sold his house on the site.

* The technological savvy and speed at which these companies can pump out new products and features, making dailies -- not known as a group for their speed or innovation -- look ossified by comparison.

* The national and, in some cases international, footprint of the major web portals. Even for newspapers that do post their classifieds and have a strong web presence, they will likely only attract buyers within their geography, significantly constricting the potential customer base for online sellers.

* The increasing comfort level Americans have selling personal goods online in a self-service fashion that's easier, cheaper and gives more exposure than an ad in a single newspaper.

How powerful are the web's advantages when compared to daily newspaper classifieds? Last year alone, help-wanted ads worth some $60 million were lost from newspapers in the San Francisco Bay area to the Web, one consulting firm estimates.

For anyone that still enjoys reading their print daily newspaper, as I do, we can only hope the big dailies adapt and find a way to compete, leveraging their loyal subscriber bases and their hometown connection with readers to branch out with new services. There are some encouraging signs, including the success of paid online sites such as the recently launched TimesSelect from the New York Times.

But it remains to be seen whether the dailies can adapt quickly enough to stem the migration of classified-advertising dollars to the Web. What's your take? Would you still sell personal items through newspaper classifieds, or instead go right to the Internet?

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