New v Old media: conflict of interest?

A lot of us have wondered how print media looks at Internet and phone classifieds in India, and vice versa. Craigslist made a significant dent in the print classifieds business in the US for highly profitable categories such as jobs, real estate, automobiles and personals. However, in India, we increasingly find that online jobs (e.g. Naukri.com), online real estate (e.g. 99acres.com - see ad in Times Property over the weekend), online automobiles (e.g. Zigwheels) and online matrimonials (e.g. Shaadi.com) have long standing deals with major print publications and have advertised on a regular basis.

Are these categories unimportant to print classifieds? Does ToI not understand that 99acres.com can cannibalize the business of Times Property? Is the opportunistic sales team of ToI flying under the radar to make a quick buck from companies that want to suck out relevant customers before head-office finds out? Do publications find new media companies too small or insignificant to be a threat? The answer to all above questions is negative. Let’s unravel the mystery.

For both businesses, reach to buyers/sellers and brokers (”party and broker”) is necessary to build a large enough business. However, it is not sufficient. A sales model to regularly collect payments from these participants is a defining part of the business and ends up consuming a lion’s share of the cost for both businesses.

Publications primarily operate through classifieds depots run by local entrepreneurs who have last-mile reach and motivation to collect small payments. The depots take care of inventory risk, defaults, ad creatives and placements. For the advertiser, the experience involves paying a local guy some money and waiting at the phone to receive calls. The advertiser may not even be a newspaper reader.

Online classifieds operate through a multi-tiered sales force of salesmen collecting money offline. These salesmen might be in-house or agency driven, and work on a commission basis. For the advertiser, the experience involves paying a friendly sales guy some money and waiting at their computers/phones to receive e-mails/phone calls. The advertiser may not have ever been to the classifieds website.

Note: Like all rules, there are exceptions. There are online players that sell through classifieds depots (e.g. Rediff.com) and publications that sell through direct sales (e.g. Mid-day).

The point is: all consumer media businesses at scale (new or old media) rely on a multi-tier commission-based sales model, even if they are able to solve the last-mile and trust problem to drive usage and deliver value. In such a scenario, aggregating a few hundred customers at a time is desirable as a strategy. If a partner can short circuit your cost structure by being proxy for hundreds and thousands of advertisers in one shot, total cost savings for these advertisers more than make up for revenues shared with the partner for those many advertisers. In fact, chances are both businesses inherently have a cost structure that favors aggregation of many advertisers into one source of revenue.

In the future, don’t rule out an online/phone classifieds powering the inventory of print publications and directing people to subscribe to newspapers, just as newspapers would direct consumers to Internet companies. It makes sense for both businesses - short and long term. Benefits of working together for both outweigh potential loss of revenue for either.

Btw, Chaupaati has partnered with multiple print publications in English, Hindi, Marathi and Urdu for a weekly Second Hand Bazaar section. The results have been successful for Chaupaati as well as the print partner, and both sides believe that we are offering more to our mutual consumers and advertisers by working together. These deals are beyond simple branding or banner advertising, and integrate at the inventory and response level. Conflict of interest, did you say?