Disturbing revenue outlook for local TV sites
Cory Bergman December 6th, 2007
If you work in local TV, this is one of the most important things you’ll read this year. Borrell Associates just published its report, “Local Online Advertising Outlook for 2008,” and it underlines some disturbing challenges for local media, especially TV stations. Borrell’s team is predicting a 48% growth in local online ad dollars next year, but standard display ads are forecast to grow by just 9%. “The decade-long era in which the banner ad ruled the web appears to be drawing to a close,” the report reads.
So where’s the growth? Local search, directories and long-form video. And the average local TV site is out of position on all three. Search is the domain of Google and to a lesser extent, Yahoo and the others. Directories like Local.com (+138%) and Business.com (+84%) are pulling in local revenue hand over foot, yet very few (if any) local TV operations have succeeded in drawing significant traffic and revenue to a directory product. Not to mention, competition is stiff with established competitors like CitySearch, local newspapers and successful upstarts like Yelp and Marchex. Then there’s long-form video. While pre-rolls are going strong for the time being, most analysts agree they’re a transitional ad unit. Borrell predicts most of the growth will center around long-form advertorial video. But as I wrote earlier this week, most TV sites don’t have the targeted audiences — which are created through search, directories, classifieds and niche communities — to successfully sell long-form video. You don’t visit a TV site to find something, like a house or a plumber or a restaurant. And few local TV sites have succeeded in creating niche sites with vibrant communities. So while local TV has a long track record of success in video advertising on TV, newspapers and directories are leading the way in long-form video sales on the web.
All this adds up to a big red flag for local TV stations, and it mirrors much of what we’ve been preaching here on Lost Remote: the web is not TV. And Borrell sums it up with the bombshell line, “It is unlikely that any web operation can grow to its full potential without being significantly separated from its parent.” In order to have any shot at growing real internet dollars over the next few years, TV stations must hire smart web people and cut them loose to do what it takes to win, even if it sounds counterintuitive. Stations must invest heavily in new products and technology that match targeted audiences with advertisers in innovative ways. It’s called making it a real priority. (If this sounds familiar to LR readers, it should.)
Borrell also underlines the important point that convergence sales (packaging TV and the web) is not a sustainable strategy. “The notion that a single operation can successfully deliver content to multiple media types has rarely worked for local media in the past,” the report reads. Borrell advises beefing up web-only sales teams to handle the job. (I agree, but not to the exclusion of training TV account executives to at least cue up an online sale.) And I’ll add this about convergence sales: in most deals, the client does not get competitive value out of the web portion of the package. That’s because the campaign is usually designed with TV in mind — driven by TV AEs — and then the web is tacked on it. Or the web value is inflated to beef up the package. As clients become more sophisticated (agencies will be first), they’ll realize this disparity and go elsewhere on the web.
All in all, this report confirms my fears that TV sites will lose share of local revenue (which is only 9.3% right now) unless they make the web a priority.
8 Comments Add your own
1. rbh | December 9th, 2007 at 7:50 am
You are correct as usual except all sales of all marketing options are under attack not just the banner. The sooner clients and sales people agree to look for the solution to a marketing problem by using the tools available (and some not yet invented) with the individual product strength in mind the sooner all boats will float.
Ideas are now and always will be the capital that propels success - execution might help too.
PS you will not build “brand preference” using search.
2. Rob | December 9th, 2007 at 12:19 pm
Banners have minimal value since all they do is point away from the news site, and pre- and post- rolls only serve as quick advertising bullets which if they’re too long annoy the site visitor and if they’re too short have minimal value in getting the advertiser’s message across to the site visitor.
OK, I get that, but what I don’t get is how local media organizations are supposed to compete with the Googles, Yahoos, CitySearches and Zillows of the world in developing local search and directories. Is the suggestion that we re-invent the wheel and develop our own local search platforms with what limited resources we have on hand to compete with the major players in search and directories?
That’s like a mom and pop store trying to stay competitive after a big box store like WalMart moves in next door … for many media organizations operating locally on a shoestring budget where the web is a secondary focus it just isn’t a realistic option to go head-to-head with them.
As for the third option - long form video - it might be a workable solution if local media have the resources in their promotions, sales or production departments and interest from media buyers.
These kinds of reviews are frustrating because they point out where the ‘big box stores’ are going but local advertisers and agencies in the smaller markets are still not up-to-speed on industry trends and are focusing on yesterday’s ad elements like tiles and banners and pre-rolls.
Without significant local interest in out-of-the-box advertising from media buyers, local media won’t have the interest in investing in out-of-the-box advertising opportunities and will get beaten to the punch by the big box stores of the Internet.
3. Safran | December 9th, 2007 at 10:13 pm
Rob: All very good points. And there are, in fact, a lot of steps the locals can do to get in on the money Gordon talks about. (As he details in his report, and no - I don’t get a cut of sales.)
The key stumbling block I find is that, when presented with opportunities, newsrooms tend to say “We’re not staffed for that,” or “That’s not news.” Immediately, the news tendency is to look for reasons not to do something.
You’re right - there’s no way to win in this game without having some skin in it. But I can give you examples of Mom and Pop stores that do well in my home town where we have Wal Mart, Target *and* a new mall with a zillion chain shops. Their secret? Better service, better products, locations that are in the town center, and a strong town citizenry identification with their stories.
There’s a lesson there, no?
4. Tom | December 12th, 2007 at 11:58 am
Wondering what is “advertorial” long-form video? Is that the only segment of video that’s expected to flourish?
5. Dave | March 3rd, 2008 at 10:39 am
Of course banner ads are dead…try and renew banner ad campaigns with any consistency….it’s a joke…if you’re using convergence to generate ntr and the client is getting results what’s wrong with that?
6. oakling | March 3rd, 2008 at 1:41 pm
Right?! It’s all about service, service, service, as far as I’m concerned. I’ve been avoiding reading or clicking anywhere near banner adds since 1998!
7. Carl | March 3rd, 2008 at 3:05 pm
Morons and there banner ad sales…you have to be kidding me…any company that goes down that path is just forestalling their inevitable demise..duhhh
8. Wessel van Rensburg | March 19th, 2008 at 5:28 pm
Long-form advertorial video, in other words sponsored video? Can you point us to any examples of what your talking about?
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