By: Jennifer Saba Economic downturn be damned. Local online advertising is forecasted to jump 48% to $12.6 billion next year, according to a new report from Borrell Associates.
Though the report delivers some welcome news for 2008 in what's looking like arid advertising year, the research firm issued this stern warning to newspapers: Internet "pure-plays" are capturing most of local online advertising.
Three years ago, newspapers accounted for the largest piece of local online advertising with a share of 44.1%. That dropped to a current 33.4%. More troubling is that Internet pure-plays now hold a 43.7% share.
Analysts do not mince words as to why newspapers are slipping. Borrell contends that companies with staff who sell both print and online advertising actually hold back potential growth.
"Nearly all local media companies that have focused on convergent sales strategies have begun experiencing slower growth," wrote analysts. "They may be reaching a saturation point at which their traditional reps have sold all the online advertising they can to their existing customer base."
Gannett is offered up as an example. The company is set to make more than $400 million in Internet ad revenue this year and yet its growth is slowing, up 7.5% for the first nine months of 2007. The local online market grew five times that rate during the same period, according to the report.
"The notion that a single operation can successfully deliver content to multiple media types has rarely worked for local media in the past," wrote analysts, "especially when it includes the expectation that a single rep will sell multiple media products at wildly different price points."
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