Papers losing real estate ads to Web

updated 4:23 p.m. ET July 29, 2007

NEW YORK - It's bad enough that a cratering housing market is leading to a slump in real estate advertising at newspapers, as a dreary series of earnings reports showed this week.

What's worse is that a lot of that advertising may never come back to newspapers even if the real estate sector recovers.

That's because a significant chunk of those advertising dollars are moving — you guessed, online.

Exactly how much of a shift is occurring is difficult to measure in terms of dollars or market share, but several real estate executives say they are making a conscious decision to move money out of newspapers and onto the Internet as that medium grows in importance as a tool for researching home-buying decisions.

Granted, a significant amount of the declines in real estate advertising in newspapers can be attributed to the general weakness in real estate markets, particularly in hard-hit markets such as California and Florida, which were booming a year ago — leading to big gains in advertising back then.

This week Tribune Co., the No. 2 publisher by circulation, posted a 24 percent drop in the second quarter, while industry leader Gannett Co. has reported a 9.9 percent decline and McClatchy Co. reported a 19 percent decline, citing big losses in California and Florida.

Like the housing market itself, much of the up-and-down movement in newspaper real estate advertising can be viewed as cyclical, meaning it will be weak in down markets and bounce back in the upward part of the cycle, whenever that comes up.

But what's worrying analysts this time around is that real estate could become the next category of classified advertising — after help-wanted ads — to mark a significant and permanent shift away onto the Internet.

The stakes are big for newspapers since classifieds are highly lucrative and make up more than 35 percent of their revenues.

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