Housing Market: Final Nail In Coffin For Newspapers?

Posted by Don Zeigler on December 16, 2008

My job entails spending a lot of time online researching trends in the real estate market. The below info is a little dated, but still pretty significant, since I’ve seen nothing to indicate the trends noted have changed any since this information was published.

The Newspaper Association of America released some data in March 2008 on the general decline in advertising revenue in newspapers. While total newspaper advertising dollars fell a dramatic 9.4% last year, Real Estate classified advertising revenue fell a staggering 22.6% from $5.16 billion in 2006 to $3.99 billion in 2007.

This is clearly driven by several major forces:

The real estate audience is no longer reading newspapers, having shifted its attention to the Internet, which is now the primary research tool for real estate research. This makes it more difficult for newspapers to sell ads to their customers. The National Association of Realtos reports that 84% of buyers used the Internet in 2007 compared to less than half which used print media.
The traditional classified advertising products are in many cases not cost-effective compared to their digital alternatives. With free Internet real estate listing services, why would one buy newspaper classified advertising? Also, as rates have been going up over the years and these products are often sold via expensive telesales operations, it is extremely hard to compete on price with internet advertising
The change in the housing market means that agents and brokers are feeling poorer and spending less marketing money. In addition we have seen the dramatic decline of the home building industry. When they are spending, they are actively looking for cheaper alternatives as they shift their ad budgets to online sites.

Ad spending in newspapers in the real estate industry has held up for longer than other industries such as autos and recruitment, but today’s market is forcing a change of behavior in how brokers and agents allocate their budgets. This will lead to a positive impact to the real estate advertising Industry as a whole as it emerges from the current decline. But there is no doubt it will take a few years.

Ad spending is more complex in the real estate industry and not purely driven by the transaction. It is also driven in a large part to appease sellers to get the listings and for brokerages to advertise to retain agents. These marketing decisions are not made on a strong financial basis and until the Industry can work to change the mindset of sellers and agents there will be lots of inefficient spending in the future.

While the news for print real estate advertising is not good, let’s face it – it was inevitable. The triple whammy of the housing market, audience migration and the slowing economy is making a tough job even tougher for the newspaper industry. While there have been numerous efforts from the newspapers to build online services these have yet to prove themselves universally successful and definitely don’t make up for the decline in overall advertising dollars. These institutions have been around for decades, and have enormous revenue streams, but it’s going to be interesting to see how all this shakes out over the next several years.

So, while the trends mentioned above are very bad news for the newspaper industry, it’s great news for the real estate industry and consumers. Removing costs and shifting ad spending to more efficient means will help brokers and agents build profitable businesses and also benefit home buyers and sellers as it helps take unnecessary costs out of the process.