Local web revenue begins to favor local media

For the first time, there?s evidence that local media companies who are ?doing it right? in the online space are actually showing revenue growth exceeding that of the pureplay Web companies in the same markets. These are companies who view the Web as an opportunity for business development, and demonstrate it by dedicating resources and personnel to the task of growing online revenue, instead of placing the responsibility on existing employees.

This remarkable finding comes from new Borrell Associates data and should bolster the hopes of local media companies to seize the moment.

In crunching the preliminary numbers, Borrell looked at 15 legacy media companies and found each generating anywhere from $10m to $311 million in revenue from local online advertising. According to the data, the average growth comes to about 19%, while the pureplay companies are averaging about 9% growth. There?s a caveat, however: ?If you add Google and Yahoo?s advertising programs to it, which admittedly aren?t purely ?local,?? Borrell notes, ?it drives the percentages up to about 20%, so they?re even. That?s not exactly a fair comparison, though.?

Perhaps even more importantly, this discovery could also encourage pureplays like Google, Yahoo, Local.com, Reach Local, Yodle and others to reach out and form partnerships with local media companies instead of competing for local dollars.

?The pureplays need feet on the street, which is too costly for them to obtain,? according to Gordon Borrell. ?In the end, they?ll probably fall back on being platform and product suppliers, leaving the local media guys as the promoters, content providers, and sales force.?

That would be an extraordinary turn of events, for the pureplay companies have been eating the local media companies? lunch when it comes to local online revenue. The image below looks at lot like a familiar game from the 1980s.

Borrell also notes that:

These 15 companies collected a total of $1.03b in online advertising in 2008.
And these 15 companies lost a whopping $1.9b in legacy media advertising in 2008.
These are the local media companies that are outperforming their contemporaries in the online space. They are executing parallel path strategies, one dedicated to brand extension and the other to business development.

?Doing it right,? according to Borrell, ?is seeing the Internet as a SEPARATE entity deserving of considerable resources, not trying to use your existing sales and content staff.? That doesn?t mean

Creating news content for local media companies is the role of the news department, whether that?s for the legacy property, the Web or mobile. This is where many companies get it wrong in viewing the opportunity strategically. Borrell ? and those of us at AR&D ? strongly feel that business possibilities for local media go way beyond the content created for news, and these types of businesses require separate content and sales people.

Borrell likens what?s happening today to that which has happened before.

?Through time,? he told me, ?local media companies were the ones who seized any ?new medium? ? whether it was newspapers starting radio stations or the radio and newspaper guys starting TV stations, or the newspaper and TV guys getting into cable back in the 1970s.?

?It?s probably a bit early to declare newspaper and TV companies the probable winners in the ?local online? space, but I?m seeing a lot of the right moves being made. And history causes me to believe it?s actually going to happen.?

I think that?s a pretty big leap, although I would certainly rejoice if that were to take place. Wherever I go, I run into disbelief about the size of the local online market and also questions about who these ?pureplay? companies are. Weddings.com is an excellent example, and Borrell says the local the local Weddings.com site typically has more revenue than the average TV station website.

This data reveals that some media companies are finally understanding the Web. Borrell thinks only 20 to 30 percent will ?get it,? and the others will just be newspapers and TV stations with brand extension sites. Which category describes your company?

The new data should be available in report form via the Borrell website next week.

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