Borrell Sees Digital Ad Resurgence for Legacy Local Media Players

Legacy media companies such as Yellow Pages books and newspapers, while knocked down by pure-play Internet publishers, seem to be making a digital ad resurgence, according to a report by Borrell Associates.

The report, “What Local Media Web Sites Earn,” found local online ad expenditures will hit $13.3 billion this year, an increase over the $12.6 billion spent in 2008.

“An odd thing occurred last year amid the relentless bashing of legacy media companies,” states the Borrell report. “While Yellow Pages and newspaper companies crashed into bankruptcy and TV and radio station revenues hit the brakes, their online hybrids zipped right along. Many of them saw strong double-digit growth in their online revenues.”

Borrell noted that Nexstar Broadcasting and Yellow Book saw triple-digit growth. And while the $12.6 billion spent last year on online advertising by local advertisers went mainly to pure-plays such as Google, Local.com, Interactive Corp., Marchex and many others, those companies are losing ground for the first time since 2001. Meanwhile, the report said, “newspaper companies effectively arrested their online share decline in 2008 after losing an average of four points per year since 2005.”

Borrell Associates President Colby Atwood said pure-plays are beginning to face a problem with churn on the advertising they sell through telemarketing and self-provision operations.

“There’s very high churn out there,” he said. “At the same time, the local media company Web sites are beginning to understand how to take advantage of the 98,000 salespeople they have and there’s a little bit more sophisticated cross-selling going on. Plus, they are beginning to add online-only salespeople, about 30 percent more, and those people are contributing.”

Although the report predicts growth for 2009, based on first quarter activity, it warns that “local online advertising can’t grow forever,” and suggests only a “mild” increase — about 6 percent — for the year. “This will be the first time local interactive ad sales have experienced a single-digit growth year since we began tracking it a decade ago,” says the report, which calls for a rebound in 2010 as the economy recovers.

Atwood said Borrell expects no growth, and perhaps even a decline, in spending on banner ads, pop-ups, and online classified listings. “The growth is going to be in e-mail, paid search and streaming video,” he predicted. “What’s happening is advertisers are learning to use unique tools. Now, your local plumber can have a TV ad campaign that is targeted. That’s kind of a strategic reason for some of these shifts we are seeing in local online advertising.”