When classified advertising specialist Junk Mail Publishing was founded in 1992, few people had heard of the Internet. Seventeen years later, the worldwide computer network has turned entire industries on its head, not least of them publishing.

Junk Mail, which produces dead-tree products in Junk Mail, CapeAds, and AutoMart, among others, has been forced to completely change the way its does business — and embrace an uncertain future. It has had to embrace the “free” culture described so well by Chris Anderson in his controversial new book, Free: The Future of a Radical Price. Anderson reckons people under 30 won’t pay for information because they have come to expect it to be free.

Junk Mail, like many traditional publishers, had long dominated its space. It had come to market with a radical idea of its own: it allowed people to place ads for free and get people to pay a premium for its magazines, knowing readers would be prepared to stump up cash to have access to a vast catalogue of advertising.

The concept worked and Junk Mail took off, taking market share from newspaper groups that continued to charge people to place ads.

Business was good for a long time, and Junk Mail expanded its operations across the country.

But trouble was looming on the horizon.

By the mid-1990s, the Internet had started gaining traction. And in 1996, a San Franciscan, Craig Newmark, launched a then-small, free classified advertising website called craigslist. Today, Craigslist is the world’s biggest classifieds website, serving up more than 20bn Web pages a month. It’s among the top 10 most visited websites in the US.

Craigslist makes money, but not very much of it. It costs nothing for the vast majority of people wanting to advertise on Newmark’s site. The only people who pay are real estate agents and those posting jobs ads.

At Junk Mail, things were flying. The company had embraced the Internet early on — it launched a website in 1997 but put it behind a pay wall to protect its print business. It was working. “Everything we touched turned to gold,” says Junk Mail MD Felix Erken, pictured.

But Junk Mail became too comfortable in its position. It was aware of Craigslist, sure, but because it dominated the SA classified advertising market so thoroughly, it felt it was immune.

But it wasn’t.

Craigslist rival Gumtree, an online classified service owned by US online auctions giant eBay, turned Junk Mail’s world upside down. Like Craigslist, just about everything on Gumtree is free — from placing ads to reading and responding to them.

“Suddenly, Junk Mail, the king of classifieds, was under threat from guys who have never been to this country and probably never will come, with these monster websites that they have spreading out all over the English-speaking world,” Erken says.

Gumtree, which employs powerful search-engine optimisation techniques to drive traffic to its website, established a significant presence in the Cape Town market.

Junk Mail’s subscription-based model couldn’t compete. “We were having our lunch eaten by these guys,” he says. “It’s remarkable how destructive the Internet can be.”

A radical rethink was urgently needed. So, earlier this year, Junk Mail threw caution to the wind and switched direction completely, tossing out its online subscription model and embracing the world of “free”.

And guess what? It’s working. Well, kind of.

“In the past eight months we’ve grown our online unique visitors by 500% and we have more ads placed with us now than we have had in the 17 years we’ve been in business.”

All the ads placed online are also duplicated in print, so, ironically, the company is leveraging the Internet successfully to support its print product.

There’s one catch, though. “We took a huge knock,” says Erken. “But we’re not worried about money for now, we’re worried about getting our market back.”

For now, he says, it’s about saving the business from a tenacious rival.

That meant changing the mindset of the company. “It’s not about protecting print anymore,” Erken says. “We are behaving like an online-only business. Print was a sacred cow for us. Now we’re eating T-bone steaks.

“We will never think about print anymore when making a decision about online.”

But how will Junk Mail make money in a world where everything is given away for free?

“I don’t care about that right now,” declares Erken. “I just want to get market share.”

Junk Mail has declared war on Gumtree. “They had an easy fight against us. No longer.” — Duncan McLeod, TechCentral