Peter M. Zollman is the founding principal of Classified Intelligence, L.L.C., a consulting firm for the classified advertising industry, which includes both print and online media.

Zollman examines trends, opportunities and missed brass rings that are likely to affect his clients. His observations about the classified advertising industry and the impact of the Internet are worth knowing. Unlike many of his household-word newspaper clients, Zollman clearly sees online companies such as eBay and Homestore as rivals for the lucrative $3.7 billion real estate advertising revenues that daily newspapers collected last year.

Have Internet advertising media awakened a sleeping giant?

"Some of them are sleeping giants, some of them are just sleeping, and some of them have woken up," says Zollman of daily newspapers. "For the first quarter this year, it was $832 million - up 8.6 percent over the 2002 number. One of the reasons they are sleeping so badly is because they see their numbers going sky high so they don't feel the pinch yet."

But the pinch is coming, suggests Zollman, unless newspapers wake up.

"A lot don't have a clue what they need to do," says Zollman. "Newspapers have for the longest time believed that all real estate is local, local, local. They believe that all auto sales are local. People buy locally - except for the fact that on eBay, 75 percent of their automobile sales are from out of state. They inspect it, ship it and off it goes."

But you can't wrap a house and ship it.

"People are doing relos," explains Zollman. "Real estate agents have acknowledged that the time working with clients is shorter, and they spend less time with them because they can look online now. So the interactive media will fundamentally change the business process of selling a house, in some cases it may make the real state agent disposable unless the agent really adds value to the process, and in other cases, it may make them more valuable."

It's even better than that. A smart MLS system, broker, and agent can deliver even more information originating with the Internet.

"Agents can do things that Websites and SMS (short messaging system) can't do for housesale information. If you find a house online you like, you can look on your mobile and get directions and tap into the MLS code and it e-mails you info about the house to your mobile while you are sitting in front of it."

So first move-advantage applies - and Internet media are ahead of newspapers. Is that what is pinching newspapers?

"Yes, absolutely, there will be a huge shift," says Zollman. "The threat is the general nature of the audience and advertisers. Advertisers like to do more with less and the audience changes its habits. Newspapers don't like to cut their rates. Every agent and broker who has half a brain understands that newspapers are still a terrific advertising medium for them. If you want to reach the audience as a Realtor, newspapers work very well for you, but will they work as well in the future?"

According to the latest National Association of Realtors survey of buyers and sellers, newspapers and the Internet are neck and neck as sources for buyers. But the growth momentum is with the Internet. In 1995, only two percent of buyers used the Internet and 51 percent used newspapers. By 2001, it was 41 percent for both.

"It is absolutely clear even to newspapers that the audience is migrating online," says Zollman. The Newspaper Association of America (NAA) recently put out a report that said 'the Internet has become the natural marketplace for classified business.' If the NAA says that, why should you or I believe any differently?"

Newspapers and IDX

Companies like Homestore and Yahoo! may be enjoying positive momentum over newspapers where consumers are concerned, but newspapers may have an ace up the sleeve.

Homestore aggregates listings from almost every MLS in the country for its subsidiary Realtor.com. Yahoo! gets listings from e-brokers who allow consumers to sign a user agreement to access parallel MLS data for viewing.

Even with 2.1 million listings, Realtor.com doesn't have all the listings in the marketplace, notes Zollman. Yahoo! only has limited partnerships - not listings from every market area in the country. Newspapers, on the other hand, could carry both MLS listings (through partnerships with brokers who have IDX) and FSBOs which could account for as much 15-20 percent of listings in most marketplaces.

"The bottom line has nothing to do with newspapers, Realtor.com or anything. What matters is the marketplace. If the newspaper has the biggest and best marketplace, then advertisers and the audience will be there. If Realtor.com is bigger, that's where the audience will go.

"What every business wants is an efficient marketplace," reasons Zollman. "Interactive is more efficient than newspapers, and it can also be less expensive and that's another good incentive for advertisers to shift their money, so if they don't change what they are doing they are going to lose the business."

Then why aren't newspapers gunning for Realtor.com, et al?

"In most markets, the Internet only reaches 60 to 70 percent of people and less of the homebuying public," replies Zollman, "but that's changing fast. Old habits die hard. I heard a big Chicago broker speak at a newspaper event. He said he spends $2.5 million a year on newspapers, but it isn't working any more. Then why are you spending it? Interactive is more quantifiable. Something is amiss. If you are a CEO and spending money foolishly, you ought to be flogged.

"Old habits die hard. Sellers still want to see their house in the newspapers, buyers go to newspaper, so you want to be there. They are effective brand-building tools which you can't say about Realtor.com. It isn't as effective as a brand building tool; it is still more of a lead generation tool.

Is there any hint that Realtors are spending less on newspaper classifieds and more on Internet classifieds?

"It is apparent that agents are shifting money from print to other advertising," says Zollman. "Newspapers are absolutely losing market share, which is not the same as revenue. Revenue has been strong but that doesn't mean that they aren't losing market share. That 41-41 percent that you quoted is already two years old. When the next survey comes out, newspapers market share and audience mind share will have slipped further."

Realtor.com enjoys an advantage with MLSs, but with the advent of IDX, Zollman claims that advantage could fade in certain markets.

"One of the greatest strengths a newspaper has is that it has the strongest database of properties," he says. "They have the capabilities of capturing real estate and FSBOs. With IDX, all they have to have is one broker, and if the MLS says I'm not giving you my data, the newspaper could go out a hire a licensed real estate agent, and say 'your job will be to sell the Realtors. We want you to set up a brokerage, so we'll take those listings."

"If the newspaper has all the listings, the MLS says 'we hate it that you have the FSBOs in the database.' You care but the newspaper audience doesn't care. The audience is where the business model is - building advertising around that."

Is that happening right now in any market? "There are newspapers that are paying for the listings. In Topeka, the MLS said 'we aren't giving you the listings, so the paper picked off six major brokerages and then went to MLS and said we beat you, because they got a better product out of the deal, and they got a better advertising out of the deal."

Editor's note: Topeka MLS CEO Connie R. Goodnow responds:

"I’ve not been contacted by our local newspaper or Mr. Zollman. Three years ago, the newspaper in Topeka made a proposal to build a website for us, thereby having a means to place all the Topeka listings on a website accessible through the newspaper website. Topeka’s MLS Directors chose not to use the newspaper technology but had a website built by someone else. They (the newspaper) have not contacted us again since that time.

There are ten local brokers for whom the newspaper has built websites, and as far as I know, none of them have been in contact with the newspaper regarding this issue. Perhaps if someone had attempted to contact myself or our President, the story would have had some credibility. A VERY visible retraction would be appreciated. - Connie R. Goodnow, CEO"

"Where they can beat Realtor.com is that the newspapers could be a lead generation tool for Realtors who want to chase FSBOs. The newspapers has someone who drives past any homes, so when someone puts up a sign the newspaper could serve as a lead generation for the Realtors, so we send you a feed of all the new FSBOs in the marketplace."

Zollman concludes, "The upshot is it is only in the second inning, but my prediction is that most homebuyers in a few years will do most of their looking online. Newspapers that have transformed themselves into a local information resource will be the company that will win. I also think video clips are better than virtual tours. A well-narrated 3 1/2 minute video clip will be the sales tool of choice in the future."

What about the sleeping giants that haven't awakened? What is Zollman advising them to do?

"Use the best online tools. They have to think of the Web as an opportunity. The Web isn't all there is to interactive media. They have to stop thinking like newspapers and start thinking like the most effective marketplace in their community."

Published: July 11, 2003

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Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. For more articles by Blanche, click here.