Online spending expected to surge in 2008
By Erina Lin, Tuesday 11 December 2007 at 22:53 :: Online/Digital Publishing :: #961 :: rss
Local online advertising spending will surge 48 percent next year to $12.6 billion, driven by paid search and video advertising, according to a new study from Borrell Associates.
Spending on local search will double to $5 billion, while online video will triple to $1.3 billion, according to Borrell Associates, also a partner of the World Association of Newspapers. Although an economic slowdown is expected to continue next year, Borrell’s forecast for 2008 exceeds the estimated 44 percent growth for local media in 2007.
"We thought it would be slowing down by now but it hasn't at all. The Internet has hit critical mass and it's become very practical for local advertisers because it appears to be driving more store traffic," said Gordon Borrell, CEO of Borrell Associates, according to Media Post.
The growth rates for most local media companies, such as TV stations, newspapers or Yellow Pages publishers, cannot keep pace with the rate for local online ad buys, the study reported. Pure-play online companies, for the first time in 2007, gained a larger share of local ad dollars than locally-based traditional players, at 43 percent.
Internet-only companies Local.com and Business.com reported the biggest online ad revenue gains among local media players in 2007 - at 138 percent and 84 percent, respectively. Google's local ad business increased 46 percent.
Gains by the Internet-only mainly came at the expense of newspapers and Yellow Pages directories, with 33.4 percent and 10.1 percent share, respectively. Those two categories have lost a combined 20 percent market share in the last three years.
To better compete with online rivals, Borrell advises that local media companies “move beyond relying on traditional reps to sell online ad packages.”
“There is increasing evidence to support the idea that a greater investment in an independent online sales force will be necessary to continue the growth these properties have enjoyed for the past few years,” the study states.
Almost all local media firms focusing on convergent sales strategies have seen slower growth. "Their convergent sales dreams are fallling apart," Borrell said. It is estimated that online-only sales forces for local media sites lifted by 50 percent this year, and will increase another 30 to 40 percent in 2008, Media Post reported.
In addition, Borrell predicts more partnerships between Internet portals, such as Yahoo, Google and AOL, and local media as they embrace competition. “Formerly sworn enemies are seeing the wisdom of combining their strengths to increase revenues for both sides,” according to the report.
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