A new Borrell Associates study commissioned by TVB finds that TV stations’ local online ad revenue soared 41% to $1.97 billion last year, and will increase another 35% to $2.7 billion this year. The study also found that the average station garnered $858,256 in online sales last year.
Local online advertising revenue continues to grow at a blistering pace with sites owned by TV stations leading the way, according to the latest study from Borrell Associates commissioned by TVB.
Total local online ad revenue rose 20.6% to $16.4 billion in 2011 and will jump another 21.3% to $19.9 billion this year, the study says. TV stations’ local online ad revenue soared 42.8% to $1.97 billion last year, and will increase another 35% to $2.7 billion this year.
If that holds true, TV stations’ share of the total revenue will go from 12.2% in 2011 to 13.6% this year.
“Share growth may continue, but only as long as TV broadcasters can grow their Internet revenues faster than the overall growth in digital advertising,” the study says. “For the next five years, we’re forecasting that [total revenue] to be an 11.2% compound annual growth rate. If our forecast for TV is correct, broadcasters’ digital revenues will grow at a 13.7% CAGR.”
The study attributes TV stations’ projected share growth this year to three factors:
- Greater demand for streaming video commercials, both on the Web and on mobile devices.
- Huge growth in mobile traffic, where ad inventory tends to be sold out and carries a higher rate.
- Greater demand from political advertisers.
The study is based on a survey of 739 TV stations coupled with Borrell’s databases of local advertising spending. In its local online ad totals, the study includes revenue from various mobile offerings. In 2011, it says, mobile accounted for 6.1% or about $1 billion of the total online spend.
Traditional media, primarily newspapers, broadcasters and directories, accounted for 56.2% of the 2011 local online ad revenue, the study says.
What Borrell calls pure play Internet companies — Google, Autotrader, Facebook, Groupon and hundreds of the like — accounted for the remaining 46.2%.
But the pure plays are starting to lose share, it says. “This is due to an evolving relationship between the pure plays, who own superior technology, and the legacy media companies, who offer promotion, feet-on-the-street salespeople and content.
“Newspapers and TV stations, for instance, have been teaming with Yahoo to help sell the massive amount of Yahoo! banner inventory in local markets.”
As of result of such partnerships, some of the revenue that was going to the pure plays is now falling into traditional media’s column.
Looking more closely at the TV stations’ online efforts, the study found that the average station garnered $858,256 in online sales last year. But, the study concedes, that average doesn’t mean much. Annual revenue among the surveyed broadcasters ranged from tens of thousands of dollars to a high of $14.2 million.
Of course, stations’ annual and median revenue depend on the size of the markets they serve, the survey says.
In 2011, in markets 1-20, the average and median were $1.6 million and $1.2 million, respectively. In markets 21-50, they were $1.1 million and $775,000. In markets 51-100, they were $644,712 and $612,587. And in markets 101-211, they were $330,839 and $294,325.
“Many stations have stepped out of the box of considering themselves a TV station with a website competing with other stations for Internet dollars. They are looking deeper at ways to tap all local online ad spending, not just banner ads.
“Some (WIS in Columbia, S.C., and WRAL in Raleigh, [N.C.], for example) have launched successful online classified advertising sections, tapping newspapers’ lucrative help-wanted and real estate advertising streams. Some have teamed up with Google or Yahoo to tap paid search advertising. A few have even pursued yellow pages advertising by setting up online directories.
“Last year, Nexstar bought a business directory company called GoLocalBiz.com to expand directory offerings across its 35 local portals, and Deseret Media in Salt Lake City hired a part-time telemarketing staff to sell $4.4 million last year in online directory listings on KSL.com.”
TV stations derive about 70% of their online revenue from banner advertising, the study says. But streaming video is coming on strong. Last year, the study says, stations garnered $338 million from streaming video commercials, up 31% from 2010.
The study notes that newspapers’ take from streaming video ads was just $10 million less than stations’.
The study concludes that TV stations can take two approaches to the online advertising market. They can view online as an extension of their core product or they can view it as an opportunity to extend the core, attack other media and grow share by pursuing non-broadcast advertisers.
“The second path is, of course, more difficult and expensive. It requires a larger staff and often the addition of online-only salespeople. Many stations have not fully accepted the notion that digital-only reps are needed. Others hire one or two reps who wind up becoming digital assistants to the broadcast reps, handicapping the station in its ability to reach non-broadcast advertisers.”
Even though mobile accounted for just 6.1% of the revenue last year, the study says that mobile abounds with opportunities. “[T]hat’s where we believe many of the future riches lie for TV broadcasters. The dramatic numbers we’ve seen for mobile traffic is not likely to abate. In fact, we’re forecasting that 88% of all local Internet advertising will be served up on a mobile device by 2016 as people migrate from desktop PCs to iPads and smartphones.”
The study also notes that local media is on the cusp of a monumental change. If current trends hold, it says, online media will surpass print newspapers in advertising revenue with two years. “[I]t would be the first time in media history that newspapers didn’t hold the No. 1 position.”