FEATURE classified ads

FEATURE classified ads

The industry hardly batted an eyelid when the Guardian Media Group said it would fulfil a long-standing ambition to acquire the remaining share of the Trader Media Group, home of Auto Trader among other titles.

And even when the amount it paid for the final 52% stake during the summer came in at close to £600m, reaction from other newspaper groups and financiers was low key, to say the least.

Compare this to other recent moves in the industry, such as Independent News & Media's sell-off of its regional newspaper titles, which turned more heads in medialand despite the comparatively low price tag of £60m.

In fact, the £593m GMG deal was second only to the high-profile Carlton and Granada merger in terms of media deals this year.

Classifieds may not be viewed as sexy by the wider media industry, but GMG clearly spotted a trend and the latest figures from the Advertising Association back this up.

Ten years ago, the split in total advertising spend between display and classified in newspapers and magazines was roughly 60/40, with display attracting £3bn and classified just over £2bn.

In the past decade, the ratio has changed dramatically, with one percentage point going over to the classified sector every year. In 2002, display commanded 51.4% and classified had shot up to 48.6%. Display has had a relatively modest climb of £1.2bn in total spend over those nine years, while classified shot up by nearly £2bn.

Others have spotted this trend, too.

In August 2001, the Daily Mail and General Trust (DMGT) paid £45m for the ailing Scoot.com brand, which gave it the profitable Loot series of classified titles.

Loot, under the leadership of Stephen Miron (who recently replaced Mike Ironside as Mail on Sunday managing director) and ex-Financial Times UK ad director Claire Payne, is now a core part of the Associated New Ventures division.

Buying in to the classified market But what has prompted two of the highest-profile media groups in the country to buy into the classified market? GMG had been involved with the Trader Media Group, publisher of the Auto Trader series and other classified titles and websites since 1982, and has been trying to buy out BC Partners, a venture capital group, for a number of years.

Chief executive Bob Phillis freely admits that the massive £593m outlay made perfect sense for The Guardian's umbrella group, with its unique Scott Trust ownership system that allows funds to be channelled between its various divisions - which can then be used to fund the national newspaper titles.

But Phillis says the lack of major publicity the deal received over the summer was a shock. "I was surprised it did not get more attention, but we knew how important it was for us," he adds.

One of the main reasons for GMG acquiring the remaining block of the TMG group - which includes 70 titles and has a massive online presence of about 23 million searches a month - was its low production costs.

"There are little editorial costs to support and it is very efficient," says Phillis. "It gives us high-volume sales but with low costs to advertisers."

Loot's Claire Payne says its acquisition by DMGT from Scoot.com two years ago was a "tactical and obvious decision" for the Lord Rothermere-led group.

"It was good for a number of reasons - the London classified market place; the synergy between its regional press business, such as Northcliffe; and the fact it had a good fit with other products, like the London Evening Standard and Metro."

And perhaps most significantly, the time was also right for the group to invest in a strategy that gave it a bigger presence in the online classified market, she adds.

Oliver Wolf, a media analyst at PriceWaterhouseCooper Corporate Finance, says both acquisitions highlight the benefits for large newspaper groups to use the classified market as a means of counteracting revenue losses from falling readership.

"Ultimately, readership is in long-term decline and hence the value of display advertising will also decline," he adds.

However, Phillis believes one of the main attractions of the Auto Trader concept is that it is "counter-recessionary", enabling it to outperform titles that depend on display advertising during economic downturns - traditional periods of concern for many newspapers.

This is a key point in the recent acquisitions of classified titles by newspaper groups.

This also leads into a perhaps more significant revelation and one that marks a major change in trends for press advertising in the UK.

The move in the past decade towards a 50/50 split between display and classified has been blamed on a number of factors.

Many in the industry suggest the rise in online sales operations, such as the Fish4 websites co-owned by GMG and regional newspaper publishers Newsquest, Trinity Mirror and Northcliffe, have had a massive effect.

The property boom of the late 1990s has also been a catalyst, alongside a buoyant job market - both mainstays of classified advertising.

But Wolf suggests the classified sector has advantages over its display counterparts, especially as the industry becomes more focused on achieving advertising effectiveness and getting a return on investment.

"People are realising that classified is a very reliable method," he says. "It feels right in terms of what appears to be for the more below-the-line advertisers."

The market-driven approach Loot's Claire Payne says the classified market also has other distinct advantages for both larger clients and smaller businesses.

"Display advertising is brand-driven, but classifieds are a call to action and therefore much easier to measure," she says. "We can be much more responsive to customers' needs, it is a much more flexible and nimble approach and is very market-driven."

But although there has been a definite shift towards classified advertising in recent years, both Phillis and Payne believe the age of the dominant display sector will not fade away.

Despite the long-term decline in display advertising, Phillis says, perhaps optimistically: "There is a recession on display advertising and we have all been hit, but I would hope that it comes back."

Large newspaper groups' move into the classified market is perhaps significant because both advertisers and media owners are looking at their spend budgets and outlets available for cross-press deals, including display, classified and online.

Payne says: "The smart business people are now looking at using both display and classified together. They are becoming more targeted and are using their budgets in really the most effective way."

So while the classified market and its instant return on investment appears to pose a threat to the more glamorous and creative press advertising partner, it seems clients are just becoming more astute and imaginative with the way they spend their money.

With two newspaper groups making significant inroads into the market, the only question remaining is when other media owners are going to seize the opportunity to enter the fray.

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