Neue Zürcher Zeitung, February 01, 2004
Two studies from Germany and the USA
For three years now, the media industry has been confronted with a continuing decline in demand for employment advertising. Newspapers have been especially hard hit by this downturn. A fact, that can only partially be explained with poor economic conditions, as two recently published studies show.
The index of job advertisements in daily Swiss newspapers compiled by the recruitment agency Manpower has seen a slight rise for the second time in a row this past December. This cannot, however, cover the fact that the market for recruitment advertising is in deep crisis. While the total advertising volume in Swiss daily newspapers decreased by 30 per cent between 2000 and 2003, job classifieds registered a decrease of 60 per cent during the same period.
Migration of classifieds
Newspapers in Germany fared no better. According to a recent study published by the consulting firm Ernst & Young* under the title Zeitungsverlage im Umbruch (Newspaper publishers under turmoil), the volume of job advertisements in Germany decreased by nearly 70 per cent in the past three years. Although job classifieds are strongly influenced by business cycles and therefore extremely volatile, a collapse of this magnitude has never been seen before. The consultants are predicting a dark future for the industry. To them, high profit margins for newspaper publishers are a thing of the past as is the “dual financing concept” – two thirds of income from advertising, one third from sales. They predict that, in the long run, the classifieds business, which constitutes the main part of daily newspapers’ income from advertising, will be lost to the competition on the Internet. The advantages of the Web with its various search options are too great in comparison to the printed press.
Recruitment advertising – particularly important to large (supraregional) newspapers – is the category most threatened by the World Wide Web. In recent years, many companies have gone over to posting a large part of their vacancies on the Internet; in newspapers, ads are placed mostly for image reasons. Nevertheless, 50 per cent of the media managers questioned for the study still hold the economic downturn to be responsible for the slump in the classifieds business. According to Ernst & Young, however, this hope is “to a large extent unfounded”, since the current newspaper crisis is just as much due to structural reasons as to the competition from the Internet or the changing behavior in media consumption; and the shift of classifieds to the Internet can no longer be stopped. Therefore, the report advises newspaper publishers to “buy into” large recruitment websites. Only thus can they prevent themselves from being pushed out of a market that was under their control not too long ago.
Slight confidence in the USA
“[T]his war is far from over”, states a study published in January by Borrell Associates** on the fight between US newspaper publishers and online services for recruitment dollars. In the past three years, the US press as well has suffered a painful decrease in revenues from job ads from 9.1 billion dollars to an estimated 4.5 billion dollars. And according to Borrell, this decline is mainly due to structural changes: the share of job vacancies published on the Internet increased from a mere 4 per cent in 1998 to more than 18 per cent in 2002, while the newspaper industry’s share of recruitment spending registered a decrease from 51 per cent to 38 per cent. Particularly in medium and small markets, which account for 60 percent of all recruitment revenues, job listings are, however, still firmly in the hands of newspaper publishers. Furthermore, newspaper cooperation projects in the online recruitment sector, whose market size is estimated at 3.1 billion dollars, are starting to show results: In the past year, newspaper recruitment websites and joint ventures between newspaper publishers such as CareerBuilder and CareerSites, in aggregate, were able to equal the revenue of market leader Monster.com.
Rates under pressure
Just like Ernst & Young, the study conducted by Borrell Associates concludes that newspaper advertising rates will come under pressure from the Internet. It therefore does not come as a surprise that, a few months ago, the Swiss Federation of Ad Buyers (Schweizer Werbeauftraggeber Verband ), whose members account for as much as 70 per cent of the Swiss advertising market, was threatening publishers by stating: “If newspaper publishers do not act now and offer fair rates for job advertisements, they will have to acknowledge the fact that there are other options for recruiting personnel.”
* www.ernst young.de