Doug Regner
Repeatable History

Craig Newmark Stole Your Morning Paper

By, 06/10/2009

Did the newspaper stop arriving at your doorstep? If you live in Denver, Baltimore, Cincinnati, or Albuquerque, a major local newspaper has shut its doors over the last three years. Seattle, Detroit, Mesa, and Flint readers still receive a physical local paper—but only a few days a week. Content is delivered solely online other days. 

City dailies are on failure's brink nationwide—cutting staff, reducing pay, and using wire services instead of generating unique content. Even the venerable New York Times is hemorrhaging cash and scrambling for a lifeline. (Newspaper Death Watch has more analysis on the decline of printed daily newspapers.)

How did this happen? A big part of the answer is Craig Newmark. In addition to changing the way we now read our news, Newmark also teaches a valuable lesson in portfolio management.

In 1995, Newmark was working at Charles Schwab in computer security and saw the Internet as a way to disseminate information to a broad audience at a low cost. He began emailing a newsletter announcing upcoming San Francisco events to friends. His recipient list grew bigger and bigger. He soon received requests to post announcements for vacant apartments, job openings, and stuff for sale. Soon, Newmark created the website Craigslist to aggregate the information, and it became exponentially popular.

So how did he help kill your daily newspaper? Traditional newspapers gather revenue from three primary sources: Subscriptions, advertising, and classifieds. Craigslist places classifieds free of charge (except job postings). That's a gigantic problem for newspapers—it's hard to compete against free.

Interestingly, Craig Newmark shows no desire to monetize Craigslist to its optimum potential. Newmark said in 2004, "I admit that when I think of the money one could make from all this, I get a little twinge. But I'm pretty happy with nerd values: Get yourself a comfortable living, then do a little something to change the world."* From a capitalist's perspective, that's weird. But Newmark has plenty of cohorts very interested in making huge profits by hosting classifieds online at the expense of your daily rag.

Selling something? eBay gives you global access to millions of people willing to bid on everything from your car, surf board, or your 1973 set of Encyclopedia Britannica, for a fractional selling fee. Need a job?, Yahoo!'s hotjobs, and allow hiring companies and jobseekers to find each other more efficiently than before. Where you might have sold your used Plymouth Valiant in the local gazette, now you can broadcast your jalopy to millions on and

Can newspapers be saved? It's doubtful. Aside from ravaged classified revenue, print advertisement and subscription revenue are also precipitously down as advertisers and readers find more for less on the Web. Without finding fresh revenue sources, it's likely traditional print newspapers have little time left.

Rather than cry over newspapers' fates, transitioning from the morning daily to the morning blog is a natural process, worthy of Joseph Schumpeter's "creative destruction." In investing, identifying these sorts of disruptive industry changes is equally important as conducting due diligence on companies. When a strong low-cost (or no-cost, in this case) competitor emerges in an industry, the status quo is often shaken. Companies enjoying existing market share must change their business models or risk losing market share or, worse, go under. History shows companies with dominant market positions frequently have a hard time turning the ship in time. Think Kodak film vs. digital technology , the local merchant vs. Wal-Mart, and video rental stores vs. Netflix . Examples abound.

(Editor's Note: Fisher Investments MarketMinder does NOT recommend individual securities; the below is simply an example of a broader theme we wish to highlight.)

Most investors focus their time researching reasons why or why not to own a particular stock, but larger sector or industry trends might make a bigger difference. Why spend hours analyzing the balance sheets of the New York Times Co. or the Washington Post Co. when the newspaper business is being vaporized? Stock picking one over the other didn't help you when US newspaper publishers as a whole drastically underperformed the S&P 500 over the last five years.

Better understanding industry trends can help provide investors a clearer sense of where to overweight and underweight stock investments versus a chosen benchmark. Own less of a category if you think its forward-looking prospects are poor, and vice-versa.

So be on the lookout for the next revolutionary business or technology. Down the line, reading a physical newspaper won't be the last habit you're forced to change.



*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.

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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.


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