The business of producing the newspapers known as shoppers, pennysavers or traders can be a very profitable one.
"The key lies in the market," said J. Kendrick Noble Jr., media analyst for Paine Webber. "Is there something there that people want and are they willing to pay for it?"
In the late 1970s, newspapers complained that such publications "were nipping at their heels," he said, but now they tend to worry more about revenue lost due to advertisers' preprinted inserts, which often can be placed in the newspaper at a lower cost than if the ads had been printed as part of the paper.
"Because (shoppers) can be less expensive and reach a niche market, they fill a vacuum to a degree," Noble said. "My guess is they've reached a level where they're doing OK, but they're not as much a problem as preprints and inserts."
An upcoming report by the Newspaper Advertising Bureau, which studies and promotes newspaper advertising, concludes that shoppers, with revenue of nearly $1 billion in 1986, compete with other so-called local competitive media for a significant portion of the classified advertising market that also is the target of daily newspapers.
30% Share of Classified Market
In addition to shoppers and pennysavers, the NAB defines local media as radio, television, cable, weeklies, some local "home" magazines, direct mail and videotext. Those media took roughly a 30% share of the classified advertising market, generating $3.5 billion in advertising revenue to the daily newspapers' $8.6 billion in local classified revenue (excluding national employment ads). The local competitive media have more of an effect on daily newspapers in large markets than in small ones, the NAB found.
Shoppers do particularly well in areas such as Southern California, where many local newspapers compete for advertising, and fare less well in smaller towns, where everyone subscribes to one publication, said Philip J. Meek, editor of the Publishing Group of Capital Cities/ABC Inc.
Capital Cities owns shoppers in California and five other states that generated total revenue of $66 million last year. Capital Cities doesn't reveal operating profit for its subsidiaries, but Meek said the publications as a group are in the black and those in California, with a weekly circulation of 1.6 million, are enjoying their best year ever.
Easier to Target Customers
"There's always some overlap (with daily newspapers), but the key is that because of the saturation and the ability to target, the advertiser, be it an individual, a retail outlet or a service establishment, can reach its geographical market so much more efficiently with a shopper than they can with a daily newspaper," Meek said.
In Southern California, "that's a market where the daily newspapers don't have the kind of penetration that they do in these cities that have nothing for 50 miles either way, (and) a lot of the business that shoppers get is not available to daily newspapers."
Larry Kline, Los Angeles Times classified advertising director, noted that The Times has special low rates to attract private-party advertisers, such as $10 to run a two-line ad for four days. But he acknowledged that shoppers and free-ad papers have an advantage in attracting advertisers looking for very low costs.
"Somebody selling a $20 set of dishes is probably not going to advertise in The Times but somebody selling a $300 bike can," he said. "The mom-and-pop papers, as I like to call them, certainly have a place in the market."