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.