Posted on 08/25/2006 12:30:47 PM PDT by abb
NEW YORK Classified real estate revenue has been the one saving grave for newspaper results over the past several quarters yet Wachovia Equity Research Senior Analyst John Janedis believes the category will soon show cracks.
In a report released this week, Janedis notes that real estate advertising has “dramatically increased its share of total newspaper advertising” jumping from 6.5% in 2000 to a forecasted 11.3% in 2006. In 2005, the firm estimates that the category contributed $1.4 billion to the companies in Wachovia’s coverage universe.
Thanks to real estate revenue, many companies have been able to report low to mid-single digit overall ad growth as opposed to flat or down.
The category also outperforms Internet ad revenue in terms of contribution to overall growth -- real estate classifieds (print and online combined) represent twice the amount of revenues, according to the report.
If the category falters, which is forecasted, it could seriously impact overall revenue and earnings per share. “A decline in 2007 could further weigh on newspaper ad growth, assuming other important categories like autos, movies, and department stores do not recover, or help wanted deteriorates further,” he wrote.
While many companies have recorded double digit increases in the category over the past six to seven months, they are starting to hit difficult comparisons.
The companies in Wachovia’s universe most exposed to any downturns in real estate advertising are The New York Times Co., Journal Register Co., Tribune, and McClatchy. “On average for the group,” the note explained, “every 5% change in real estate revenues is equivalent to a 0.7% change in EBITDA.”
Jennifer Saba (jsaba@editorandpublisher.com) is associate editor at E&P.
Ping
I think the dinasaur media and newspaper bubble is about to burst.
Somebody alert George Soros: here's another use for his billions.
The Denver Rocky Mountain News and Denver Post, which are actually the same paper after a merger, raised classified rates by about 150% after they merged. Now, instead of 35 real estate adds relating to a particular part of the metro area, there will be 7 to 10.
The math is easy to do.
Actually, the real estate company that I work for has started this year to reduce the amount of newspaper advertising because it just isn't effective. Most of today's buyers start out on the internet. In fact, last year our company setup special phone numbers for newspapers ads only to track calls on individual listings. It was surprising (or maybe not) that hardly any calls came in on those numbers.
In a recent meeting, our VP of the company mentioned that in the Chicago market, 80% of the ad revenue at one point for the Chicago Tribune was from real estate related advertising. According to him, a lot of the companies have pulled out of newspaper advertising in that market and seriously impacted ad revenue for the Tribune.
Interesting stuff. I would have thought car ads would have been just as high of a percentage of total ads.
A little over 3 years ago, our son and dil listed their home for sale in a very hot market. The sign went up and the flyers were in the box. They had nothing for about aweek. The realtor was pushing for an open house that weekend, and our son and DIL weren't that excited about an open house.
A realtor friend, who knew that market said the agent there was probably playing games and hadn't listed the house on the internet and "missed" the weekend real estate ads. Their house wasn't on the internet.
We notified our DIL, and she went after the agent and told the agent, she had 24 hours to get the house on the internet or their contract with her was cancelled. Then our DIL called back and told the agent, she wanted their home listed on the internet before the business day ended.
It hit the internet that night, and they had several interested people who saw the house over the weekend, and they had a mild bidding contest from them to buy the house. The ad didn't appear in the local fishwrap that weekend.
They didn't have an open house and will never use that agent again. That area and the buyers are computer and internet oriented, and many if not most of those now living in the area don't subscribe to the Frico Gayrhonicle nor the local fishwrap.
Car ads are leaving newspapers in wholesale numbers, too...
The local and bigger dinosaur fishwraps are taking it in the shorts with lowered apartment ads. Craig's list is devouring them.
Car, truck, rv and boat sales are going to the internet instead of ads placed by individuals.
When I sold my house in California, I ran an ad in the newspaper for it. It had just two lines:
2 br 1 ba cottage
www.myhouse.com (not the actual URL)
The newspaper charged me double for the ad because it had a URL in it. I thought that was pretty funny.
I did an entire website for the house. I ran the ad, starting on Wednesday, for three days. I had over 50 people come to the open house, and sold the house on Sunday to one of the visitors. I got three other offers for it, as well.
But the newspaper thought they were getting at me by charging me double. Silly newspaper.
I also bypassed the real estate brokers, selling the house myself and letting the title company handle all the paperwork. Saved myself a few percentage points.
When the house went into escrow, my wife and I invited the buyers over for dinner. Very nice young couple. We still stay in touch, and they have our wedding picture hanging next to the front door.
Not all real estate deals have to be nasty.
When I sold my house in California, I ran an ad in the newspaper for it. It had just two lines:
2 br 1 ba cottage
www.myhouse.com (not the actual URL)
Yeah, and they still can't compete with Craigslist. I've run a lot of ads on Craigslist, both selling and looking for stuff. Super effective. I quit using newspaper classifieds altogether. They're a waste; they're expensive; and craigslist gets results for nothing.
Proud member of the Dinosaur Media DeathWatch™ Crew of the FReeping Parasitic Information Gatherers Brigade.
Yeah, but most of these car and real estate sites are owned by newspapers.
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