Craigslist took nearly $1 billion a year away from dying newspapers

Of all the factors responsible for the massive decline of the newspaper industry, Craigslist, the internet's free classifieds page, has long attracted a big share of the blame.

So it's no surprise that a new study by Robert Seamans of New York University's Stern School of Business and Feng Zhu of the Harvard Business School seems, on its face at least, to back up the blame-Craigslist argument. What is surprising is the actual numbers.

Analyzing how 1,000 newspapers reacted to the rise of Craigslist from 2000 to 2007, the professors estimated that classified ad buyers saved $5 billion by posting free listings on Craigslist instead of buying ads in newspapers. The obvious corollary here is that newspapers lost the $5 billion that consumers saved, and saw their classified ads business — one of three longstanding revenue pillars, along with circulation revenue and more traditional ads — all but decimated.

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Researchers also found that following Craigslist's arrival, newspapers that relied heavily on classified ads for revenue lowered their classified ad rates by 20.7 percent, increased their subscription prices by 3.3 percent, and suffered a 4.4 percent decrease in circulation. Essentially, newspapers reacted to the drop in classifieds revenue by cutting classifieds rates and upping subscription prices. Some subscribers responded by jumping ship.

Of course, Craig Newmark — yes, that Craig — has long said he's not to blame for the fall of print newspapers. "I'm still waiting to see any hard evidence for cause-and-effect," he told The New York Times just this week. "I've been paying attention for a long time."

Gigaom's Mathew Ingram thinks it's a classic case of scapegoating. "Blaming Craigslist for the death of newspapers is like blaming Napster for the decline of the record industry: It makes for a convenient scapegoat, especially when the members of the market that has been disrupted don't want to focus on how their own mistakes and ignorance helped push them off the cliff," he writes.

Even Seamans agrees that it's overly simplistic to pin newspapers' financial pain solely on Craigslist. "Your average newspaper in the past received around 40 percent of its revenue from classified and that has basically disappeared due to Craigslist and other online ad sites," Seamans said. "But we don't believe newspapers are dying or that Craigslist is leading to the death of newspapers.."