While the classified advertising numbers at The McClatchy Company, as reported on the Q110 earnings calls, appear glum at first glance, the revenue is on the upswing finally, according to chair and CEO Gary Pruitt.

On the earnings call he told us, “Classifieds is the most cyclical and hit the hardest but it’s also the one category that will recover best – and it’s where we have very strong digital products,” he said. “It’s been down for 16 consecutive quarters but has improved sharply the last three quarters. Classifieds bounces around the least and trends most with the economy. We think it has the most upside and gives us the most confidence going forward of improving advertising revenue trend.”

The greatest McClatchy classified struggle is in California and Florida, where employment and real estate are down considerably more than other McClatchy property locales, and where the economic recovery is most lagging. Pruit “thought” that McClatchy was the only newspaper company that increased digital revenue in 2009 – another good sign for its classifieds.

Revenues in the first quarter of 2010 were down 8.2 percent from the first quarter of 2009.  Advertising revenues were down 11.2 percent year over year, with retail declining 11.5 percent, national 7 percent and classified 13.8 percent. The hardest hit classified category was real estate which suffered a YOY drop of 26.8 percent. Recruitment advertising dropped 18.4 percent, and automotive was down 14.1 percent.

Circulation revenue increased 1.8 percent in spite of cutbacks on delivery.

“The circulation we eliminated was not as valuable as that we kept,” said Pruitt. “It had more churn, it was third-party or discounted subscriptions. Because of this readership declined much less than circulation.”

Christian Hendricks, McClatchy’s VP of Interactive Media responded to our question about the pairing of WebVisible and Yahoo Newspaper Consortium’s behavioral targeting products. (See CIR 10.18, Sept. 17, 2009 for details on how newspapers are making money with the BT product.)  Hendricks said that the two would be a packaged sale, and that the media group expects to introduce more products and services from other firms as well. Pruitt announced that all McClatchy papers would be live with WebVisible by the end of 2010.

Here’s the complete earnings release.