Local Online Spending is Red Hot Again!

After a brief slowdown during the recession, local online advertising is booming again. A new report from Borrell Associates, the Williamsburg, Va.-based local ad tracking firm, predicts that online ad spending will rise 21.3 percent this year, to $19.9 billion, following 20.6 percent growth last year, to $16.4 billion. The internet is also becoming a bigger part of all local advertising, 20.7 percent this year, behind only newspapers at 22.2 percent. Borrell predicts that by 2014 online will pull ahead of papers as the single biggest local advertising medium, which is a historic development. Newspapers have been No. 1 since advertising began being tracked decades ago. This online spending growth is being fueled by small- and medium-sized businesses, which are increasingly willing to try new and cheap forms of advertising. Kip Cassino, executive vice president at Borrell Associates, talks to Media Life about how digital advertising was impacted by the recession, how traditional media companies are adjusting their web strategies, and how newspapers are making a major internet push. What is fueling the renewed growth in local digital advertising, after a brief lull during the recession? The major growth is the increased involvement of the SMBs, which are now converting from offline to online advertising wholesale. As an example, manufacturers have decreased their use of direct mail by half during the past few years in favor of e-mail and other online ad platforms. How was local digital impacted by the recession, and how does it differ from the effects on traditional media? Local businesses of all kinds were deeply scarred by the "Great Recession," and the healing has yet to begin for some even now. All expenses were cut. Advertising and marketing were severely limited, if not cut altogether. Because traditional media outlets--the newspapers, broadcasters, and directories--still had large numbers of "feet on the street," they were able to coax some advertising from even the hardest hit local economies. In cases where these traditional outlets also had a vibrant online sales initiative, some gains were seen. However, in outlets where everybody sold every ad product, the reps went back to their roots--and local online suffered. How are traditional media companies adjusting their online offerings to attract new customers? How long has this shift been going on? These media outlets--both traditional and new--do not move in lock-step. There are virtually as many individual approaches as there are players. In general, businesses selling online media advertising have learned (or are learning) that there's a big world beyond banners, and that they had better learn to play in it. One-note strategies don't work like they used to--prospects have too many other choices they can make. Services have to be part of the mix along with advertising alternatives. In fact, some media companies have learned that the bigger margins are in services and non-ad marketing, not ads. Why are the biggest local digital companies dominated by commerce-focused companies? Because they realized what the newspapers claimed 20 years ago is true: content IS king! The problem is, the newspapers back then (and some to this day) believe that advertising is content--in many cases, the most attractive content. So the "commerce-focused" companies are selling content. They are selling ad content. And the audiences love it. What is helping to fuel the growth of newspaper web sites? Four factors: 1. They have big local sales forces that know their markets intimately. 2. They are trusted by their local advertisers, from years of contact. 3. They started marketing online before anybody else in the markets they serve. 4. They are, more and more, willing to look at online as a separate product--rather than an extension of the printed "core" product. How have TV stations expanded their sites to draw in more advertising? In many ways, the TV stations are where the newspapers were several years ago. In many cases, they still market "up-sell" (i.e., "If you buy a broadcast spot, for a few dollars more we'll also put your ad on the web."). Some have progressed beyond this level, and realize the value of online as a separate product in its own right. These are the stations making the most online ad money. Why are cable systems the "upstart" in the local digital field? How are they making their money? Instead of being called upstarts, they should probably be called "late sleepers." For almost two decades they overlooked the enormous traffic their portal sites enjoyed every day and took no steps to turn that traffic into ad revenue. During the past two years, the big cable providers have wakened to the potential. Now they are beginning to reap the benefits. Why did radio stations lose web market share, and will that change this year? If cable is a late sleeper when it comes to online ad value recognition, the radio stations have been in a collective coma. Instead of looking at what was happening in the market around them, the stations looked only at each other. Since no progress was being made, they continued to ignore the gains made by other media outlets in their markets. With a few remarkable exceptions, they contented themselves with marginal up-sell programs wrapped around their online content. Now even these late-to-the-party media outlets have begun to realize what they're missing. They have the potential to make inroads into TV and newspaper share. They have large sales staffs, and they know how to market promotions as well as advertising.