Study: Newspapers Halt Local Online Advertising Share Decline

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By: Jennifer Saba

Have newspaper Web sites turned the corner with local online ad spending?

A new report from Borrell Associations found that for the first time since the research firm started tracking local online ad revenue share in 2001, the big pure play companies lost ground. Furthermore, newspapers, which have been losing share since 2005, finally halted the decline in 2008.

Newspaper accounted for 26.4% of local online dollars in 2008, down slightly from 26.9% in 2007 while pure-play companies such as Yahoo and Google, lost 2.1% of its local online share to 47.6%.

Borrell suggests that the “feet-on-the-street” sales teams, an estimated 98,000, are giving newspapers an edge over Internet-only sites. The firm forecasts that the local sales teams of newspapers will grow 30% in 2009 compared to 2008.

Borrell analysts anticipate that newspapers will increase online revenue almost 6% in 2009.

The study also breaks out which categories newspapers generate the most online revenue. No surprise, the industry is still “overly dependent” on classifieds. “Their struggles to develop Internet revenue can be tied directly to their dependence on these categories — all of which have experienced a catastrophic free-fall over the past eight years,” Borrell analysts wrote.

The charted decline in the category is stunning: In 2000, print classified advertising peaked at $19.6 billion. In 2008 it fell to $9.9 billion, Borrell reported. And the attempts to capture those dollars with online classified verticals haven’t come even close to making up the shortfall. Borrell said that in 2008, newspapers generated $2.4 billion in online revenue classified advertising categories, only about 25% of their annualized losses in print.

Some other notable findings: Those newspapers investing in online video — though only a small percent — are reaping ad dollars. On average 27.7% of their total online revenue comes from video. One site reported it pulled in $550,000 from online video advertising.

Help-wanted advertising online fell 7.2% in 2008 and is expected to drop 3.2% this year. Despite the housing crisis, newspapers are forecasting that real estate advertisers will increase their budgets in 2009. Remarkably, online auto advertising rose 1.8% in 2008 due mainly to used-car sites. Newspapers are anticipating that growth to continue in 2009, budgeting for a 40% increase, Borrell noted.

Classified category killer Craigslist generated an estimated $79 million in 2008 from an average of 18 cities where the site charges. Borrell believes Craigslist is on track to pull in $160 million revenues next year after the site introduces a fee for erotic services ads.

Overall, local online advertising is expected to grow 6% to $13.3 billion in 2009.

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