Borrell to broadcasters: gauge the (real) market

Market share should drive local television station online revenue efforts, not budget goals or growth. That’s one of the key findings in a new television benchmarking study from Borrell Associates released this week at the annual Television Bureau of Advertising (TVB) conference in New York. While local stations have gained market share in the past year, that share still pales in comparison to local newspapers, which have been at the game longer and more seriously than TV stations.

Local online ad spending is projected to increase by 40-50% in the next year, so even a station that grows its local revenue by 35% will be losing ground in terms of market share. Of course, the big gainers in local online revenue are the outside-the-market internet pureplay companies like Google, Yahoo!, MSN and AOL.

This strategic approach to attacking the existing ad marketplace is foreign to television stations who are used to competing only with each other over the airwaves. That sense of competition is carried into the online world, and it is one of the things that is keeping stations from reaching their online potential. Online, it’s not about WWWW-TV versus KKKK-TV, for that “market” is an illusion. The real market is vastly bigger and includes many, many other players, so when station managers compare their revenue only against what the other stations in the market are doing (and even the newspaper), they commit a form of self-delusional business suicide.

Total online ad revenues for local TV stations this year are projected to be $1.1 billion, according to Borrell Associates CEO Gordon Borrell. That’s a 45% increase over the $770 million last year.

Another key recommendation for broadcasters is to adopt a niche mentality for the Web.

Some 90 percent of the respondents to our survey say that at least two-thirds of their TV Web inventory remains unsold. That’s likely because the “mass” appeal of news, weather and sports pages aren’t as attractive to advertisers as pages that contain content specific to their business (think health care, real estate, and automotive content), or to their customer base (think young adults, women, or suburban communities).

One of the most striking differences between this benchmarking study and the one Borrell has done for newspapers is the complete lack of stations who perform in what Borrell calls “the green zone,” those local media companies who have a market share of 28% or higher. This demonstrates how far behind local stations are in their competition with their print counterparts for local online revenues. All broadcasters need to study this green zone approach, for these companies approach selling the Web very differently than traditional media account executives.

Green zone performers have dedicated online sales people, work with non-traditional clients, have an amazing thirst for data, use a consultative sales strategy, can’t get enough training and set much higher rates.

The salespeople at these sites seem to understand that this is an early-stage medium, so you can’t just go out and plop a proposal down on someone’s desk and expect them to understand what they’re getting. They look for data — loads of it, on traffic, Internet usage, the rate of online ad spending by the type of advertiser they’re approaching — anything that will help the advertiser understand what’s happening with the Internet and how they might take advantage of it. And of course the consultation — they ask the advertiser questions before blurting out what they have to sell him or assuming they want a massive broadcast and online reach. They do not.

Television stations with at least one online-only salesperson achieve an average of 26 percent more online revenue than their counterparts who rely solely on broadcast salespeople to sell the Internet.

Every day we’re reading stories of company after company laying off people and tightening belts, because business for local media companies is going south. The remarkable thing about this, to me, is that this is an Olympics and election year, the kind that normally produces significant revenue growth for stations. Unless local stations do something with the only market that’s actually growing (online), it’s hard to rationalize how they will survive 2009.

Gordon Borrell understands this like few others, and we need to pay attention to what he says.

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