Local advertisers are expected to increase their online ad spending by just 6 percent this year, a sharp pullback from growth of 46 percent in 2008, Borrell Associates Inc. said in an annual survey of media companies.
Borrell is forecasting a rebound in 2010, with growth of 13 percent, and said quicker improvement in the economy could lead to more growth than currently forecast for this year. The long-term forecast calls for local online ad spending to peak at $15.9 billion in 2011 before contracting the following two years to $15.3 billion.
The survey included 4,353 media companies representing more than 6,000 Web sites in the U.S. and Canada, including 75 percent of TV stations, 59 percent of daily newspapers, 27 percent of radio stations, and 388 independent local sites.
Newspapers remain overly dependent on real estate, automotive and help-wanted classified ads, the report said. After peaking at $19.6 billion at the turn of the century, newspaper print classifieds have plunged for eight consecutive years, hitting $9.9 billion last year.
The $2.4 billion in revenue newspapers generated in online classifieds represents only about 25 percent of their annualized losses in print, the report said.
On average, newspapers saw revenue from online real estate classifieds fall 2.6 percent last year, although that number is expected to rebound by 6.3 percent this year as real estate agents return to newspaper Web sites, Borrell said.
Online real estate classifieds accounted for 7 percent of classified revenue at newspapers with circulation of 2,000 to 10,000, and nearly 14 percent at papers with circulation of 200,000 to 500,000.
Local advertisers bought $12.6 billion in online ads in 2008, Borrell said, with “legacy” print and broadcast media like newspapers, TV and radio stations beginning to take back ground lost to “pure play” Internet companies like Google, Local.com and Interactive Corp. …CONTINUED
While pure-play Internet companies claimed 47.6 percent of local advertising revenue in 2008, that’s down from 49.7 percent in 2007 — the first time legacy media companies have taken back market share since Borrell began tracking local shares in 2001.
Legacy media companies may have “finally turned their aircraft carriers,” the report said, thanks in large part to a sales force of 98,000 workers who can cross-sell online ads to local advertisers they have existing relationships with.
Legacy media companies also grew their “Internet only” sales force by about 30 percent in the last year, to 9,000 at the beginning of 2009, the report said.
Newspapers had the largest local online ad share among legacy media companies (26.4 percent), followed by Yellow Pages publishers and other directories (11.2 percent), broadcast TV (8.6 percent), magazines (2.7 percent) and radio (2.2 percent).
That’s not to say that legacy media companies aren’t hurting. Revenue from online operations still accounts for only a small part of their business — 12.3 percent for Yellow Pages companies, 7 percent for newspapers, and 3.4 percent for TV and radio broadcasters.
One magazine, The Real Estate Book, managed to grow online revenue by 11 percent in 2008, but still generated 94.5 percent of revenue offline, the report said.
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