Rivers of (Online) Gold

Fairfax’s new CEO – former Rugby World Cup winning All Blacks captain, David Kirk – isn’t getting much good press. Last week plans by management to axe almost 70 jobs sparked industrial action. A number of commentators, including the ABC, linked Fairfax’s woes to the “threat that digital technology poses to the future of newspapers.” In particular, classified revenue, once called “rivers of gold” for Fairfax, is now being swallowed up by online competitors.

Last week shareholders of carsales.com.au agreed to a merger that sees Kerry Packer’s Publishing & Broadcasting Ltd take up a 41% stake in the online classifieds business, and Fairfax’s share drop from 11.6% to 6.8%. This article in last weekend’s Australian sums up the situation:

The contrast was stark [yesterday] - John Fairfax Holdings Ltd cutting jobs as classified ad revenue leaks to the internet, while the more web-savvy Packer family jumps in ahead of them to take command of an online auto advertising business [carsales.com.au], that is eating away at those newspaper classifieds.

But Fairfax is not giving in. Bloomberg reports that Kirk has announced Fairfax may add travel and financial services to its Internet sites to help boost sales. They certainly need to do something – Bloomberg says Fairfax shares have fallen 9.2% this year, compared to 12% gain in the benchmark S&P/ASX 200 listing.