Steve Outing — who’s been trying to prod the newspaper industry to embrace its digital multidirectional future for the past decade — asked me what the future holds for newspaper classifieds. He’s behind the site, an initiative aimed at bringing experts together to revive newspaper classifieds by finding a new business model that’s relevant in the Internet age.

I left the Sacramento Bee 12 years ago to work at various Internet startups, and the contrast between newspaper culture and tech startup culture couldn’t be more stark. If newspapers are to revitalize their revenue streams in the online medium, they’ll have to make some major changes. I toss out a few ideas in this Seesmic video, and I’ll reproduce my main points here:

First, embrace video. What can you do that Craigslist, Monster and other sites aren’t doing yet? Push video in a big way when it comes to real estate listings, cars for sale, even job listings. Real estate agents and auto dealers are already beginning to use video; establish a partnership. Create a local posse of videographers and videobloggers. Young people — remember them? — are into video in a big way, and the cost of storage and bandwidth has dropped dramatically. Don’t be afraid to experiment. As we say here in Silicon Valley, dare to fail. Maybe you try to live-stream a half-dozen yard sales every weekend using or another service. Try something nobody else has tried before.

Next, get visibility on your paper’s website. Your classifieds department’s future is linked to the vitality of the newspaper website. Talk to your new media director about the value newspaper classifieds can bring to your users. If you don’t have a keyword alert service and an RSS feed for dozens of different classified items — like a used BMW coming onto the market — you’re missing the boat.

Take a look at targeted advertising initiatives. I can’t tell you how many conferences I’ve attended where “targeted advertising” is seen as the holy grail. Figure this out, and you’re golden. Newspapers should be the natural leaders when it comes to delivering relevant, useful content to users in a trusted way — and yes, classifieds are content.

Next, make sure your paper’s website is taking advantage of geocoding and the new location-aware technologies. You should be doing tons of mashups, using Google Maps to map relevant classifieds to a physical location and to plot them and aggregate them on an interactive map.

Finally, embrace the personal media revolution. Your paper’s website should have a strong social networking component. We all belong to a community, but too many online newspapers think they’re about just publishing the news rather than embracing the conversational aspects of the Web. With hundreds of thousands of social networks, it’s clear that people want to connect with other people who share their interests. Plug into the social media Zitegeist.

And good luck.