If pageviews are your goal, it’s time to revisit that strategy!

Websites run by local media companies are worth a whole lot more than their owners think, according to fascinating new research from Borrell Associates and BIA Financial Network (BIAfn). Gordon Borrell told me a few days ago that this may be the most important research he’s done, because it may finally move local media groups to accept that their web properties are worth more than most think. I will tell you that the report does that and more.

What emerged was another strong indication of the fundamental changes taking place in the media industry: local Web sites generate important value for their owners, especially for owners that have positioned their sites for growth in key high-demand advertising categories such as e‑mail, streaming video and paid search. Some of these local Web sites are worth between $300 million and $450 million, and even small sites are seeing values in the low millions of dollars.

The thing that first leaped out at me was a portion of the sentence above referring to “high-demand advertising categories such as e‑mail, streaming video and paid search.” This does not bode well for media companies who have bet the future on strategies that emphasize page views with multiple display ad impressions. The report shows that category is in decline.

“Sites relying primarily on banners and classified listings can expect flat to declining ad revenues,” the report says, “and, therefore, diminished valuations.”

The chart below from the report shows why, because valuations are all about the future. Display ads are in decline while streaming audio and video are projected for significant increases. The problem here is that even television stations aren’t fully taking advantage of this, choosing instead to opt for newspaper-esque “information portals” that are built on the paradigms of print (display) advertising.

chart from Borrell report

Newspaper sites top the list for valuations with the median being over $3.5 million. TV stations are next with just over $3 million, followed by pureplays ($2.4 million) and radio ($1.2 million). The median values for newspaper Web sites in different revenue brackets range from nearly $500,000 to almost $30 million; for TV sites $500,000 to $9 million; and for radio sites $250,000 to nearly $6 million.

Local pureplays, the report says, are just beginning to make inroads, and they could be substantial. They are at a disadvantage, however, because they lack what websites with a traditional media partner can provide: promotion, content, and current advertiser relationships. Pureplays include companies such as AOL, MSN, Google, Yahoo and Monster, as well as vertical directories (“FindADentist.com”), geo-domains (“CityName.com”), and many others. Despite the disadvantages noted, these companies provide a profound threat to the well-being of any traditional local media company, but only if we do nothing.

chart from Borrell report

This report is another wake-up call for mainstream media groups, but this one is written in the language of the boardroom. Investors and investor groups understand things like valuations, cash flow, value magnifiers, and discount rates, so it’s likely to open a different set of eyes. I certainly hope so.

Access to the report and a free copy of the Executive Summary can be found at the Borrell Website.

(Originally published in today’s AR&D Media 2.0 Intel newsletter)

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