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Papers losing real estate ads to online

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 last 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.

Last 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.

Mike Simonton, the top media industry analyst at the Fitch Ratings credit analysis service, says that currently a good 30 percent of help-wanted classified advertising is now online, while the Internet’s share of real estate and auto classified advertising is lower, at about 15 to 20 percent, but poised to move higher.

“The threats from the Internet are real,” Simonton said. “Newspaper advertising should remain under pressure until newspapers are better able to address the threat of online advertising.”

Representatives of several major real estate franchisors said in interviews that many home sellers still see newspaper advertising as an essential component of selling a home, but that younger brokers, home sellers and buyers are clearly more focused on using the Internet.

“For our agents, newspapers are an old standby,” said Abby Lee, director of regional advertising in Denver for RE/MAX, a major real estate franchisor. “With younger agents, there’s a trend of going online. There’s a realization that’s where they need to be.”

Suzy Antal, director of marketing, communications and public relations for Prudential Real Estate Affiliates, a unit of Prudential Financial Inc., said many Prudential agents have been pulling back on advertising during the current downturn, but as they return, they’re shifting ad budgets to their own Web sites, creating blogs, and taking different approaches beyond newspapers.

“Is newspaper a high priority? No,” Antal said. “I don’t believe my buyers and sellers are going to be in that market.”

Newspaper publishers understand they need to move more aggressively to hold on to real estate advertising. “We can’t sit on our hands,” says Charlie Diederich, the director of marketing and advertising at the Newspaper Association of America, an industry group.

Diederich said newspapers are still a key part of most people’s real estate searches and an important tool for realtors to make people aware of their brands. But he also acknowledged that newspapers need to do more to make their own Web sites essential to home buying decisions.

“We’ve got to improve both our print but especially our online products … so consumers will continue to come to us first so we can deliver that audience to the professional realtor,” Diederich said.

A group of five major newspaper publishers also owns Classified Ventures, a Chicago-based business that powers the real estate sections of the Web sites of its 125 member newspapers.

Tim Fagan, president of that group’s real estate division, said Classified Ventures would “significantly increase” its investment in Homescape, a real estate-related Web site that provides home listings, but he declined to provide specific numbers.

Whether those efforts will be enough to stanch the flow of real estate ad dollars to online alternatives remains to be seen.

Blanche Evans, the editor of Realty Times, an online real estate news service, says that realtors now have a number of alternatives besides newspapers for listing homes for sale, such as http://www.Realtor.com, a site run by the National Association of Realtors, in addition to major online destinations such as Yahoo Inc.

As home-buyers flock online, it’s also tough on realtors, Evans said, since home-buyers are becoming accustomed to seeing extensive color photos, descriptions of the neighborhood as well as video tours of the property — all of which costs money to produce.

With all the online tools available today, realtors “have the ability now to really expose the property in a significant way,” Evans said. “People have the ability to tour the house. That has changed everything.”

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Judge Permits eBay’s ‘Buy It Now’ Feature

A federal judge denied on Friday a request from a small Virginia company to stop the online auction powerhouse eBay from using its “Buy It Now” feature, which allows shoppers to purchase items at a fixed price.

Judge Jerome B. Friedman of Federal District Court denied a motion by the Virginia company, MercExchange, for a permanent injunction to stop eBay from using the feature. The Supreme Court ruled last year that, although eBay infringed upon MercExchange’s patent for the service, it was up to the lower court to decide whether eBay had to stop using it.

In his ruling, Judge Friedman said the company was not irreparably harmed because it continued to make money from its patents, either by licensing them outright or by threatening litigation against those it believed infringed upon them.

“MercExchange has utilized its patents as a sword to extract money rather than as a shield to protect its right to exclude or its market share, reputation, good will, or name recognition, as MercExchange appears to possess none of these,” he wrote.

A federal jury found in 2003 that eBay had infringed on MercExchange’s patent and awarded the company $35 million. The amount later was reduced to $25 million.

Greg Stillman, a lawyer for MercExchange, which is based in Great Falls., Va., called the opinion a double-edged sword.

“It was sort of good news, bad news for both sides,” Mr. Stillman said. He said he was sure that eBay was relieved not to be enjoined but that the judge “made it quite clear that they’re going to have to pay for that right.”

Catherine England, a spokeswoman for eBay, said the company was “extremely pleased” in the decision to deny the injunction.

In the closely watched case, the high court ruled that judges had flexibility in deciding whether to issue court orders barring continued use of a technology after juries found a patent violation. The decision threw out a ruling by a federal appeals court that said injunctions should be automatic unless exceptional circumstances applied.

The case became a rallying point for critics who argue that the federal patent system is riddled with abuse from small businesses that sue established companies to enforce patents for ideas that have never been developed into products.

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Zune users to be paid for sharing songs?

A recent patent application by Microsoft describes a mechanism whereby Zune users are paid for sharing songs. Currently the company’s digital audio player has the capability to wirelessly swap music with other Zune owners, with the restriction that any shared song can only be played a maximum of three times. After which you’re given the option to buy the track from Microsoft’s Zune Marketplace. In a move designed to encourage sharing — and in turn, sell more music — Microsoft proposes paying users a percentage of revenue from sales generated through tracks they’ve shared.

But perhaps what’s most interesting is that the system works even if shared songs weren’t originally purchased from Zune Marketplace and, therefore, don’t use Microsoft’s DRM. In other words, DRM-free music that’s been downloaded from elsewhere — including pirated songs — still have the potential to be monetized through Zune to Zune sharing. That’s because, rather presumptuously, the Zune wraps its own DRM around every song that’s shared.

Paying users for sharing tracks that subsequently lead to a purchase is an interesting concept, which at least shows some innovation in terms of how to convert piracy into legitimate music sales. However, with the music industry moving away from DRM and towards universal formats, the idea may have already expired before it ever hits market.

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