Local Web Ad Spending to Hit $13 Billion in 2008, up 50 Percent

05/30/2008

In its report, What Local Media Web Sites Earn: 2008 Survey, Borrell Associates’ reports that local online ad spending is increasing at a rate of 50 percent. If it keeps going at this rate, it will hit $13 billion this year. {Source: What Local Media Web Sites Earn: 2008 Survey].

What accounts for this kind of rapid-fire growth? In two words: sluggish economy. When the economy is in a downturn, companies look for cheap, effective ways to advertise. When compared to more traditional forms of advertising, online advertising is both of these things.

In perhaps an ironic twist an old media niche, newspapers, are leading the pack here. They spent over $2 billion on web advertising in 2007. This was more than all other local online media firms put together. Where are newspapers getting this type of money to advertise? From their web-only subscriber base. Almost 60 percent of the money came from this consumer niche.

Newspapers are finally realizing the power of the web and are jumping on it in a big way, even going so far as to develop new sites, and develop more content exclusively for the web.

In spite of all of this, ad revenues collected by newspaper sites fell from previous years. Four years ago, for example, it was 44 percent of total local online ad market share, in 2007 it was 25 percent. Experts attribute the fall off to the Achilles heel of newspapers – the classifieds. The aforementioned report noted that almost two-thirds of total classified ads were online in 2007.

But, things are looking up for newspapers in a big way. In total, they have an approximately 3,800 foot-soldier-strong ready sales force to sell online. Many larger outfits may have upwards of 40 sales people dedicated strictly to online selling. Experts point out that internal sales forces are the way to make a mark, as it is easier to put together customized sales packages for advertisers, among other benefits.

What about other advertising mediums like radio? The report suggests that radio could be making bigger inroads in online advertising. However, they would have to give up old industry habits like using ineffective terrestrial radio salespeople for a new medium like online advertising. Radio revenues did rise fifty percent from 2006 to 2007 (from $125 million to $189 million).

This year’s predicted growth is around 35 percent for radio.

Other local ad spending stats from the report:

Ad spending on local TV is expected to surpass $1 billion this year. It grew by almost 75 percent from 2006 to 2007 ($772 million was the total take).

Revenue for directory publishers is projected to reach $1.2 billion this year. That’s up from $993 million last year.

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