A new academic study indicates that major US newspapers lost more than $5 billion of classified advertising to Craigslist. The study looked at the impact of the entry of Craigslist into newspaper markets from 2000-2007, and the resulting changes in classified advertising revenues.
In sum, the failure of newspapers to effectively compete with a more efficient and high-value competitor entering the market in this one sector triggered a downward spiral in both revenues and circulation.
What the study, and news report, don't bring up is that there was no reason that newspapers couldn't have entered the online classified market themselves, and captured a large share of that market. In fact, several major newspapers had successful online classified trials in the late 1990s. But most publishers felt that entering the online classified business might impact print circulation and sales - which it clearly did. The problem is that rather than capturing that impact for their organization, they let somebody else grab it - and the resulting revenues and audience attention.
Sources - Craigslist Costs Local Newspapers $5 Billion in Lost Ad Revs, Media Daily News
"Response to Entry in Multi-Sided Markets: The Impact of Craigslist on Local Newspapers," research study by R. Seamans & F. Zhu