Borrell benchmarks 2010

Borrell Associates released its annual media benchmarking report this week and there are three big stories to report, one that we would consider good news, the others not so much. The report is an annual broad study of the local online advertising marketplace and one that reveals trends that media companies need in order to make good strategic and tactical decisions for the coming year.

THE THREE BIG STORIES

pureplays remain at 48%The slice of land held by the “pureplays” has stopped growing. For the past ten years, we’ve watched the pureplays’ slice of the revenue pie locally grow and, like Pacman, devour everything in its path. For the third year in-a-row, the share of revenue going to pureplays has stayed the same. In terms of actual dollars, it grew, because the overall pie grew, but this is an important stemming of the tide for local media companies, because their efforts appear to have stopped the growth of their biggest competition, pureplay Web companies like Google, Yahoo, Groupon, etc.

These Internet companies, which grew share of local online ad dollars from zero to 48% between 2000 and 2008, have hit a wall. Some have folded, others continue to grow, and the biggest have formed partnerships with local newspapers, TV, radio and directories.

Content is king, but not the content most people think. As we say here at AR&D, advertising is content in the Media 2.0 world, and that is born out by this report. According to the Borrell report, the Top 5 local online companies derive all their content from their own advertisers. In fact, half of the top 20 are all-advertising sites.

In 44 of more than 200 markets we track, Groupon or Autotrader.com generates more revenue than the largest local newspaper, TV or radio station online operation in that market. It is a startling revelation considering the fact that Groupon did not have a dime of revenue two years ago. This year, about two dozen of its local operations will generate more than $10 million each. Craigslist, meanwhile, generated about $20 million from its site in New York and about $1.6 million each in Phoenix and Houston. Autotrader.com will bring in more than $10 million per site in more than two dozen cities.

advertising content dominates

A canyon has formed between legacy media companies that are gaining share in the digital space and those that are losing it. There seems to be no helping some local media companies, those who, for whatever reason, decide not to or are unable to dedicate resources to online efforts, placing their future in jeopardy. At this late date, the energy required to cross the canyon is significantly more than it was a few years ago, and that spells trouble for some.

The most aggressive are seeing 20 percent or more of their ad revenues coming from digital sales. In 2010 they reported double-digit and even triple-digit growth in online revenue as they continued to invest in staffing and technology. On the other side of the canyon are companies that have hamstrung their online ventures with little to no dedicated staffing, allowing the new-media venture to be directed by old-media managers. Their digital revenues remained flat or declined last year.

Overall, the report shows a healthy and blooming market, one that shows promise ahead due to mobile. Online media accounted for $13.5 billion, or 14.9 percent of all local ad spending in 2010.

We are forecasting that to grow this year by 17.8 percent as the economy rebounds and mobile media fuels greater excitement at the local level. Without mobile advertising, “local online” (basically banners and search advertising served up on Web pages) would likely be flat for the foreseeable future, signaling the maturation of what is now a 15-year-old medium and the emergence of a new one to steal the attention. By 2015, the majority of all “online” advertising will become untethered from desktops and will be delivered to mobile devices such as iPads and other tablets, smart phones, and GPS-enabled laptops.

local online forecast

By 2015, Borrell projects that newspapers will be toppled as king of the local advertising marketplace, ending a run that has lasted since anybody first started counting such data. Online will, by then, be a $24 billion dollar market, representing a 22.7 percent share of all local advertising. The Local Web has become a relentless juggernaut, and yet we understand so little about it. And for a marketplace that’s just 15 years old, we can safely predict that many more disruptions lie ahead.

The annual Borrell benchmarking study can be obtain via the Borrell Associates website.   <Link>

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