If local newspapers want to save themselves from Craigslist, Wal-Mart is their best chance.

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June 3 2008 2:07 PM

Can Wal-Mart Save Local Newspapers?

Craigslist, take note: It takes one monolithic villain to beat another.

Illustration by Robert Neubecker. Click image to expand.

Wal-Mart doesn't know it yet, but it may be the savior that local newspapers have been praying for. The big-box retailer launched a new service without any fanfare last month and dubbed it Wal-Mart Classifieds. It slunk into WalMart.com's left navigation bar, where it still sits inconspicuously—a dozen links from the top of the page without a hint of its brand-new status or its potential power. Its promise is well-hidden; as of now, Wal-Mart Classifieds is a clunky marketplace with spotty listings and a poorly designed interface. But its sorry debut doesn't have to remain its destiny. Wal-Mart can use the tool to liberate newspaper balance sheets from Craigslist —the misunderstood villain of the classified industry.

At this point, it's passé to say that Craigslist has demolished local newspapers nationwide. Newspapers' classified-ad revenues climbed reliably for a half-century, beginning in 1950 and ending in 2000. Once the new millennium arrived, though, expenditures crested and started to fall like a stiff log off Splash Mountain. Last year they declined by 16 percent. Craigslist, meanwhile, watched the plummet from the observation desk, soaking up business (but not necessarily profits). Stripped of their classified revenue streams—which had especially high profit margins—newspapers were forced to start stripping their payrolls.

For years, academics, journalists, and bloggers have used Craigslist as a scapegoat to hide the truth of the matter: It wasn't Craigslist's fault—newspapers simply screwed up. They failed to see the power of the publish-anything-anytime-anywhere Internet, so they fell behind. And once Craigslist found traction, it was off to the races.

These days, Craigslist is such a monolith you would think newspapers would have joined in. But Craigslist doesn't want newspapers stealing its infrastructure. Craigslist is still an island community compared with most of the Web. To use Craigslist, you need to go through its site and manually input your wares for sale. You can't graft your own database into the Craigslist architecture. (This is what's called an API in techie talk.) This forced newspapers to fend for themselves as nuclear winter approached and classified rations were running low.

Funnily enough, Wal-Mart's dominance of the retail market and its destruction of mom-and-pop stores is quite similar to the Craigslist situation. And in an ironic twist, Wal-Mart is now positioned to be newspapers' savior. Wal-Mart's classified service runs on a platform provided by Oodle—one of those Silicon Valley startups with terribly silly names. Oodle recognizes Craigslist's dominance but wants to open the architecture up to partners in order to increase the network's reach (via APIs and other methods). The company partners with 80,000 different sites, according to the CEO, and listings provided by any one of the 80,000 are visible across the entire Oodle network. That means something posted on, say, the New York Post's classified network shows up on Wal-Mart's and vice versa.

In theory, this business model means that everybody wins. Oodle gets more participants in its network, which makes its classifieds more robust and attractive. Local newspapers get to brag that they have listings not only from their own listings but from tens of thousands of other sites on the Internet. The individual sellers get a broader audience, and the individual buyers get more offerings to choose from. This is key: In the commodities market, Oodle needs to compete with eBay's vast inventory, and in the services field (real estate, job listings, etc.), it has to make an indent against Craigslist's market share.

The business model sounds great, right? Alas, there's a snag: Only about a dozen local newspapers have actually partnered with Oodle; the other 79,988 sites are mostly Web commerce and auction players looking for another outlet for their products. In other words, the local classified market is still trying to fight off Craigslist from hundreds of different directions, when what they really need is to form a unified front.

That's where Wal-Mart's deal with Oodle could be a turning point. Wal-Mart is a big-name company that can rally newspapers around one technology and one classified portal. Think about it: When a major celebrity picks one nonprofit to highlight his or her agenda, folks quickly rally around that organization to express their activism. (See: the One Campaign, Save Darfur, Barack Obama).

Wal-Mart certainly qualifies as a celebrity in the world of commerce. Last year, it had enough revenue to be one of the 25 largest countries in the world. Twenty-six million people already come to WalMart.com every month, which makes it one of the biggest players in Oodle's network. Newspapers looking to increase their sales pitch to prospective classified advertisers can say that at least 26 million Wal-Mart customers are among the paper's clientele.

Also, there's an opportunity for Wal-Mart to tap into its rural strengths. Craigslist, with its Spartan layout, city-centered mentality, and questionable personal ads comes across as a product of the urban, young techno-elite. Wal-Mart can be the people's champion, protecting small-town papers and communities from big, scary San Francisco snobs. (Already, Craigslist's current expansion centers on creating new markets beyond its typical urban focal points.) Wal-Mart can use its neighborhood roots to convince local papers to join its (and, therefore, Oodle's) classified network. This is a PR coup for Wal-Mart, which can spin the initiative as its way of investing in local communities—something it hasn't exactly been known for in the past. And that's why it's such smart business for Wal-Mart to enter into the local, online classifieds game in the first place. Protecting the First Amendment is a good way to convince Americans you aren't the devil.

But this elaborate scheme to save the local press isn't happening anytime soon—at least not while Wal-Mart continues to be a reluctant messiah. When contacted, Wal-Mart wouldn't schedule an interview for this story, issuing only a cryptic statement in response. The Classifieds page is still hidden on WalMart.com, and I couldn't find any promotions pointing users to the new feature. If Wal-Mart is planning to save the local press, they're certainly being coy about it. Maybe the Wal-Mart Classified's logo should be a winking emoticon ;-) rather than their usual smiley-face logo.

But the onus isn't squarely on Wal-Mart. Newspapers need to sign up with the Oodle network in order to build incentives for Wal-Mart to give its Classifieds site the publicity it needs to thrive. The more classifieds available, the more impressive of a product Wal-Mart has to tout.

Still, Wal-Mart would be silly to pass up the opportunity to capitalize on the online classifieds market without at least trying. The Anybody But Craigslist movement needs a leader. Who better to lead than a company that knows a thing or two about being an industry's monolithic villain?