2010 is starting out to look like a fairly good year for some media companies, especially those with television station groups. In addition to a booming political year, there are signs pointing to a rebound in radio and TV advertising. According to a report in Media Daily News last week, we’re looking at three years of growth.
Media forecaster BIA/Kelsey says local advertising revenues for television and radio will reach $34.3 billion in 2014, up from $29.9 billion in 2009. That’s a 2.8% compound annual growth rate. Digital revenues for local TV and radio are expected to soar nearly 18% over the same period.
The same report shows that, by 2014, local TV digital ad revenue (mobile and Web) will reach $1.2 billion and represent 6.5 percent of the segment’s total $18.3 billion in revenue, up from 3.1 percent in 2009. Wow, sounds great, huh?
The problem with reports like these is always the assumptions behind the numbers. Here BIA/Kelsey has defined the market for local TV digital ad revenue as that which is produced and maintained by local TV stations. In this world, the competition for that $1.2 billion is the other TV stations in town. This is a myth, folks, because the real market is actually much bigger, and unless we wise up, our failure to act is going to hurt more than just local media. Local economies will suffer, as real local dollars quietly slide away to people who realize that — at least online — “local” is nothing more than a cash register for them. They don’t have to worry about employees, their families, and the many services that cater to them.
In the real Web world, for example, the pureplay Web companies are our enemy (competition), not the other media companies in town. Our barometer for success is measured against them, not the poor guy down the street with his own antenna, although those pureplays are very happy to have us think otherwise. Champagne corks pop when Google executives read a report like this the one from BIA/Kelsey, because it’s the distraction they need to not only pick our pockets but the local communities in which we live and work.
I’m increasingly coming to believe that this is a problem for the same local business communities that are using the tools of these pureplays to enable commerce. How?
Below is the latest graph from Borrell Associates depicting the market change between 2008 and 2009 in money that originated in the local marketplace and was spent on local online advertising. Note that the pureplays share of the market — a $13.2 BILLION dollar market — is now 51.7%.
The market is growing. Borrell projects it’ll be very close to $15 billion in 2010.
What is the impact to your community’s advertising economy as a growing chunk of cash disappears? What impact does that have on the whole economy of your region? Local media companies employ real people and provide real dollars to the community, but that’s not the case with the pureplays. They are parasites, draining sustenance from markets in the name of enabling commerce. To whom will local merchants sell, if their money ultimately goes to Mountain View, California or hundreds of other places where these companies employ real people?
It’s not their fault; they’re just trying to do business. It is the fault of the local advertising economy — including all of the local media companies — who think they’re playing soccer when the game is really basketball.
Here’s the first line of a chilling article from Forbes:
National advertisers spend more than $120 billion on advertising in local markets and Yahoo wants it.
Of course they do. Local is THE target for the big boys now, because local is where online advertising is growing.
Can any local media company beat the pureplays like Yahoo and Google on its own? I don’t think so. And let’s be clear about one thing: companies like Reach Local and Yodle are Google in disguise, but Google just the same. They’ve found creative ways to use the tools of Google to make it easy for local merchants, and they’re very good at it. But every dollar that goes to them leaves the market. Let’s not forget that.
Here’s another Borrell chart that shows how the pureplays are making their money. The bar on the right hand side has Google written all over it.
So perhaps we can’t beat Google on our own, but we can beat them by working together. That concept is becoming more rational with each passing day. I’m not suggesting it will be easy, but we all have a much bigger enemy that each other. Who will step forward and lead the way? If you want to know how I would do it, just drop me a line.
Originally published in AR&D’s Media 2.0 Intel newsletter.