Tap Local TV’s Digital Ad Revenue Potential

As mentioned in my last column, industry leaders participating in MFM’s recent Media Outlook 20013 seminar agreed that digital media sales represented the best opportunity for growing their ad sales business in the coming year.

Brian Wieser, senior analyst, Pivotal Research Group provided our seminar attendees with a number of insights about where to expect those increases in digital ad spending to occur and realistic goals for the different segments.

Weiser examined the budget forecasts and advertising goals for what he sees as the three key categories of digital marketers: e-commerce businesses, small and medium-size enterprises (SMEs) and, of particular interest to TVNewsCheck readers, what he describes as “TV-centric” brand marketers.

With respect to the online community, “e-commerce drives endemic activity,” Wieser observed, noting that annual e-commerce sales has increased from roughly $25 billion in 2000 to nearly $200 billion last year.

As further proof that “endemics are dominant online,” Wieser reported that that the seven leading companies in e-commerce — Google, Amazon, EBay Priceline, Expedia, Groupon and IAC — spent an average of $6.9 billion each on advertising in 2011. That number represented a 57% increase over 2010. More than 90% of the ad dollars spent by these seven companies went to online media. In looking at the entire category, Weiser finds that e-commerce businesses seek to meet their goal of online sales through placing roughly two-thirds of their online advertising spends on paid search and the remainder on other online media.

In taking a closer look at the marketing activities for small and medium-size businesses, Wieser noted that their digital media goal of offline sales means SME’s need marketing campaigns that “gets the phone to ring.” In addition, their limited internal resources drives demand for automated, “all-in-one” solutions that can work at a small scale.

To give you an idea of the potential value of this segment, consider these statistics from Wieser’s presentation:

• The 5.6 million U.S. businesses that generate less than $10 million in revenues spend an average of just under $7,000 on advertising, representing a market of over $38 billion in total ad sales.

• The country’s 152,000 companies that gross between $10 million and $250 million in revenues each spend more than $258,000 on advertising per year.

• The 7,486 U.S. businesses that take in more than $250 million in revenues spent an average of $25,190,053 on their annual ad budgets.

When it comes to ad spending by large brands, Weiser notes that their overall marketing focus is on the best opportunities for reach and frequency, which is why they continue to favor TV over the Web. TV achieves a monthly reach of close to 290 million viewers compared to 180 million who access the Internet via a computer.

With respect to frequency, Wieser displayed a slide that illustrated the enormous advantage TV holds over the Web, regardless of age category.

For example, TV’s average use by 25-34 year-olds amounts to more than 25 hours per week, compared to 5-6 hours of Internet-based viewing per week by the same demo. 35-49 year-olds, who spend about the same amount of time on the Web each week as the 18-34 demo, spend even more time on TV — north of 30 hours per week. As expected, the 50-64 and 65+ groups spend slightly less time on the Web and significantly more time watching TV, with the 65 and up demo averaging 45 hours of TV watching per week.

In pitching large companies for digital media spending, their “decision making can be consensus-driven,” Wieser finds. To illustrate his point, he showed Media Outlook 2013 attendees a sample org chart, where brand managers within a company’s  product groups must coordinate their activities with the firm’s centralized creative group, which often reports to a CFO-led procurement department, and the company’s trade/retail distribution group. Understanding — and addressing — the goals for each of these organizational units will help to determine which digital media enterprise can close the deal.

When it comes to analyzing where companies spend their money on digital media, Wieser pointed out that “display and ad tech” have been enjoying the greatest growth, with global Internet advertising, excluding search, mobile and online video, skyrocketing from $10 billion in 2001 to more than $40 billion by 2016.

Examining those excluded categories of mobile, online video and search, Wieser says the mobile medium represents “more endemics and more money,” with mobile advertising revenues projected to climb from less than $1 billion in 2007 to more than $47 billion globally by 2016. He expects the “small but growing,” online video market to increase from roughly $1 billion in 2007 to $12 billion by 2016.

The paid search category, meanwhile, is on track to become “the ultimate directory business,” according to Wieser. Paid search, which grew to match U.S. directory revenues of $10 billion in 2009, increased to nearly $15 billion, as directory spending dropped by roughly the same amount as companies re-allocate their directory spending to search. On a global scale, he expects the paid search category will increase to nearly $70 billion by 2016, largely due to spending by SMEs.

With respect social media, Wieser says an examination of ad spending on Facebook illustrates that “brands everywhere are still defining their social tactics.”  For example, Coca-Cola, which leads with 40 million “Fans” — people who have “Liked” it on Facebook, also leads with the smaller but more important category of “PTAs” — people talking about.

“Fans can be readily targeted by the marketer on Facebook through news feeds or by other means,” Weiser explained. Meanwhile, the PTA stat, which for Coca-Cola averaged 556,000 last winter, “refers to the number of brand interactions that occurred in the most recent seven-day period and reflect one measure by which to assess how many consumers are currently actively engaging with a brand on Facebook.”

Taken as a whole, the data Wieser shared with our Media Outlook 2013 attendees points to local television’s potential to attract a significant portion of this growing digital ad spend.

Through their local ad sales teams, stations have relationships with the 5.6 million SMEs looking to devote a larger share of the $38 billion they will spend on advertising to digital media next year. Not only can stations provide the display advertising opportunities that command a significant portion of the digital ad spend, broadcasters have demonstrated their ability to drive that large number of people who spend their time watching TV to those ads.

In addition, SMEs number among the businesses looking for a way to harness the potential of social media to meet their goal of getting customers in the door. Through social TV campaigns, TV networks and local stations have demonstrated the medium’s ability to generate PTAs.

As Wieser observed, mobile represents the fastest growing digital media advertising category. Data from eMarketer and others has demonstrated the increasing role that mobile devices have in driving retail traffic. Stations can take advantage of viewer interest in their weather and sports apps to provide that marketing opportunity for local businesses and generate substantial ad revenue.

For example, attendees at MFM’s annual conference earlier this year learned that Belo’s Dallas Morning News is already generating more than $1 million through sponsorship of its mobile apps.

Wieser’s findings concerning the potential for local stations to capture a large share of the growing digital media ad spend have been echoed in recent reports from a number of industry analysts. I look forward to sharing examples of how local stations are seizing these opportunities in future columns; I hope you will share your challenges and successes as well by commenting below or through an email.

Mary M. Collins is president and CEO of the Media Financial Management Association and its BCCA subsidiary. She can be reached at [email protected]. Her column appears in TVNewsCheck every other week. You can read her earlier columns here.