WITH his short hair, white shirt and sensible tie, Ed Williams looks an unlikely internet revolutionary. Yet if anyone doubts that the worldwide web is profoundly reshaping large swathes of British business, this former IT consultant and civil servant is living proof.

Williams is chief executive of Rightmove, which runs a website that allows estate agents to advertise their properties to buyers. It is about to float on the stock market and spiralling valuation estimates — north of £300m for a firm that is barely five years old and employs 200 — testify to its strength, with more than 70% of the online property market and 4.5m monthly visitors.

This is ringing alarm bells among executives in the business with the most to lose: regional and local newspapers, with their hundreds of millions of pounds worth of classified property advertising that threatens to migrate wholesale to the web. Such fears were graphically underlined on Friday when Daily Mail and General Trust pulled the high-profile sale of its Northcliffe regional newspaper division, complaining that none of the bidders had been prepared to offer enough.

Rightmove’s success is merely the latest sign of the shock waves the internet is sending through traditional businesses as broadband connections spread and more consumers get hooked on its convenience and price transparency.

In Britain it has already decimated the travel-agency business, with agents such as MyTravel closing hundreds of high-street outlets under pressure from internet sites like Expedia and Lastminute.com.

The internet is fundamentally reshaping the retail trade, with online spending up 29% year on year — growth that is 15 times faster than the sector as a whole. Retail businesses without an online strategy can find themselves swiftly swept away.

If anything, today’s figures understate the threat to bricks-and-mortar retailers, because of the way the internet is robbing the high street of pricing power: just ask HMV, the struggling music and books chain.

Now it’s the turn of newspapers to feel the heat in their classified advertising departments. Rightmove is only one symptom in one sector. But as companies like Craigslist, and in future Google, make inroads with free classifieds, there is no part of the print advertising industry — jobs, cars, travel — that will remain untouched. Add in circulation revenues under pressure and display advertising also migrating to the web, and you have a whole business model under threat.

A recent study of the American market published (online, of course) by consultants McKinsey underlines the point. Classified ads traditionally make up one third of American newspapers’ advertising revenues, but between 2001 and 2004, they lost more than 40% of their share in some classified categories.

In jobs, source of one third of total classified revenues, newspapers have been undercut on price by internet recruiters, and volumes now stand at half of where McKinsey reckons they would have been if recruitment ads had come back to newspapers with economic recovery.

Small wonder that Rupert Murdoch, in his recent wake-up calls to newspaper editors, has spoken of the industry’s “rivers of gold” running dry, or that Daily Mail and General Trust struggled to offload Northcliffe. Online job ads, incidentally, were up 80% in Britain last year even as publishers such as the magazine outfit Emap complained of revenue lost in print. Northcliffe’s recruitment ads were down 6%.

Several things make the Rightmove story a cautionary tale for newspaper companies. First, the sheer mismatch in pricing. Rightmove charges a simple flat fee of £250 a month per office for estate agents to show all their properties on its site. In contrast, a month of insertions in a local paper can cost anything between £1,000 and £5,000, making print advertising the estate agents’ second-largest cost item after staff.

Second, the simplicity of its business. Rightmove was founded and is still part-owned by an estate-agency chain — Countrywide — and it is ruthlessly focused on one thing: strengthening and deepening its relationship with estate agents. If a representative selection of properties is on the site, house buyers will flock to view them, and if the buyers come, more sellers will hook up. It is what the economists call a “network effect”, giving the market leader in businesses of this kind — such as Ebay — a built-in advantage.

Thus Rightmove now carries ads from 8,500 estate agents out of a national total of 13,000, and it claims to be Britain’s ninth most-trafficked website — bigger than Tesco.

The client relationship, moreover, is about to get a whole lot deeper. In the flotation Rightmove announced last week, it will be offering estate agents privileged access to half the stock on offer, and Williams has his eyes on new services, such as making the house information packs that sellers will have to provide from next year.

This points to a third and perhaps the most worrying conclusion of all for the newspaper business: that it by definition lacks the focus needed to compete with the Rightmoves of this world — that it is hobbled by a business model that is rapidly becoming obsolete.

“Newspapers have been a wonderful bundled service offering something for everyone,” said Williams, self-consciously adopting the past tense. “But it involved significant cross-subsidy from advertisers to readers, and classified was a significant element in that. What happens when people no longer need to pick up the paper to see what’s for sale?” Newspaper proprietors know what he means, and in the past 18 months they have been frantically buying up property websites. Thus Rightmove has five online competitors in Britain, and every one is owned by a newspaper group.

All are growing, to be sure, but none of them has more than a quarter of Rightmove’s revenues. And of a national residential-property advertising pie of £500m, newspapers still command £350m. That is a juicy target indeed for a start-up with everything to play for.

And that’s why Williams, alone in the online property business, resisted and will continue to resist the overtures of buyers from the newspaper world. This is not a wind of change, it’s a gale. Many businesses lie in its path, and it has many years still to run.

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