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Hanging Up: Ads Move Online

When readers of the Daily News of Los Angeles and other local papers owned by MediaNews Group Inc. want to submit a classified ad, they can contact the newspapers as always or they can sit down at their computer and hit a few keystrokes.


Traditionally slow to embrace change, newspapers are finally adjusting to an online world and standing to benefit is AdStar Inc., a small publicly traded Marina del Rey company that has been contracted by MediaNews to provide the technology that allows readers to post their classified ads online.


AdStar has reached deals with more than 50 U.S. newspapers this year to provide its suite of classified ads software. Last year, the company took on only a single new client.


Jeff Baudo, Adstar’s senior vice president and chief operating officer, said the partnerships show how papers are accepting a technology they once viewed with suspicion. “When we started doing this in 2000 and 2001, the major newspapers really saw the Internet as the enemy,” he said. “The young readers that newspapers can no longer get on the print side they can now get on the online side.”


Up until two years ago, MediaNews’ L.A. papers, part of the Los Angeles Newspaper Group, were not equipped to receive classified ads online. An initial agreement with AdStar in 2003 allowed users to build simple ads online, and under the new agreement, software has been upgraded for more sophisticated ads. The AdStar technology also allows users to pay for their ads using credit cards and to schedule both online and print publication dates.


It may seem like a no-brainer for those accustomed to ordering books on Amazon.com or trading used merchandise on eBay, but it’s a sea change for newspapers, which historically have resisted change.


“Newspapers traditionally are quite frugal,” said John Iobst, vice president of Technical Solutions LLC, a partnership of the Newspaper Association of America and the media association Ifra. “But they will pay to implement new technology if the competition demands it.”



Newspaper frontier


The move to online classified ordering remains in its infancy, with most ads still hand-keyed by an operator into a computer. Moreover, the shift has been slowed by a pickup of classified advertising, which showed a revenue increase of 5.1 percent in 2004, compared with a decline of 0.6 percent in 2003 and 15.2 percent in 2001, according to Veronis Suhler Stevenson LLC, a private equity firm specializing in media. This year, it’s projected to grow another 6.4 percent.


Veronis Suhler Stevenson attributed the rebound to a stronger job market spawning more help-wanted ads and the booming real estate market. The firm said that newspapers face stronger competition in the future from Web sites maintained by local real estate brokers and multiple listing services.


The numbers reflect the up-and-down fortunes of AdStar, which cut its second-quarter loss to $70,000, compared with $388,000 for the like period a year earlier. But revenues fell to $1.3 million from $1.4 million.


AdStar was founded in 1985 by consultants Leslie Bernhard and Eli Rousso as a project to expedite the often-backlogged flow of classified advertising at The Star-Ledger in New Jersey.


Bernhard, who is AdStar’s president and chief executive, and Rousso, who is executive vice president and chief technology officer, took AdStar public in 1999 just as the Internet showed signs of transforming the newspaper industry. They created a portal, advertise123.com, that was supposed to feed advertising to more than 100 top newspapers, but the effort flopped as newspapers decided they wanted to retain control over their classifieds.


That attitude has changed, with many papers no longer refusing classified advertising from third-party agencies or resisting efforts to distribute advertising beyond the print newspaper and its Web site. AdStar is in partnership on a system allowing used-car dealers to continually update their car listings when cars are sold or added to inventory.


The dealer advertising system is expected to debut in Atlanta later this year. The Atlanta Journal-Constitution, which is owned by Cox Newspapers Inc., already operates a separate Web site allowing people to search for used cars by keying in various criteria.


Eric Grilly, president of MediaNews Group’s interactive division, said newspaper publishers no longer view the Internet as an appendage to their print classifieds.


“The Web product is now driving the print product, which is new to our industry,” Grilly said. “We’re not leading the pack, but we’re not as far behind, either.”


MediaNews also has found it cheaper to allow advertisers to create their own classifieds online rather than phone them into call centers, and is considering a discount for ads entered online.


Grilly called AdStar’s technology the best in the industry in allowing users to create their own classified ads, enter their billing information online and publish the ads in print and online formats.


Bernhard said the spate of new partnerships this year demonstrates the willingness of publishers to try new technologies, which ultimately should benefit AdStar.


“Frequently you’re dealing with people who are used to empire preservation, body count, keeping the bonus structure and it’s very, very difficult to convince them to change,” Bernhard said.

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