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As promised, we will continue with more from the Borrell Associates* latest report on Online Spending and how it relates to a local business. Thanks for your response to the first installment of this report in the March newsletter (available on our website - www.effectiveadvertisingseminars.com).

We weren't surprised by the response since some surveys indicate some 65% of local advertisers were buying some sort of Internet advertising. We are increasing the Online portion of our seminar/workshop to help with your questions about this newest medium.

This first article shows the growth patterns and the major uptick projected for two years from now.

Benchmarking TV Online Revenues

 

Benchmarking TV Online Revenues

Sales at local broadcast TV operations outpaced the overall growth of local online advertising last year, resulting in share gain of 1.1 points. TV Internet sales brought in $1.4 billion in 2010, 14% more than the previous year. Results at individual stations were broadly mixed, with many sites seeing single-digit growth percentages and several experiencing growth in the 20% to 35% range. One interesting characteristic was that several of the more mature TV sites - the ones that had already been generating significant revenues - grew better than average last year instead of seeing their growth mature. One station group reported growth above 60%, to more than $25 million in revenues.

The outlook over the next few years is very promising. The stars appear to be aligned for local broadcasters as the Internet evolves from a medium most suited to newspapers and magazines to one that is more video-centric, suited to television. The wedding of video advertising with direct response and couponing may be a match made in heaven for local advertisers who've had to rely on disconnected media buys in TV, yellow pages, newspapers and direct mail to complete their marketing campaigns in the past. Thus, we are forecasting a 17% increase in local online revenues for TV broadcasters in 2011, and even higher rates of increase in 2012 and 2013. If our forecasts bear out, local broadcasters would see interactive sales double by 2015. We're forecasting the total to reach $3 billion over the next five years. Though that may seem huge, that would still represent only a 12% share of all locally spent advertising, a gain of just 2 points from the current level.

The 2011 forecast increase of 17% is unusual in that it's very much in line with what many stations are budgeting - and station managers have a miserable record when it comes to budgeting internet sales growth. This year they might actually be on target: their average budgeted growth in 2011 is 16%. But it's that 33% increase we're forecasting in the break-out year of 2012 - fueled by a sudden uptick in web-based and mobile video advertising as 4G devices come into play - that may take managers by surprise.

On the issue of share of local online ad spending, the broadcast TV industry overall claimed a 10.4% share of that $13.5 billion spent on local online media in 2010. That was an increase of 1.1 points from 2009, when the industry claimed a 9.3% share. The median share per station in an individual market was 0.4% for large markets and 2.0% for small markets.

CONCLUSIONS & RECOMMENDATIONS

Last year was another banner year for TV web sales, and 2011 promises much of the same. The opportunity for local broadcasters is bright as online media becomes more video-friendly. The forecast for 17% growth in TV web revenues this year sounds pretty good, but our forecasts of 33% growth in 2011 and 27% growth in 2012 sound, well, wildly optimistic. But we're confident that many local broadcasters have invested in the infrastructure needed to begin achieving that growth and have only just begun to invest in the people required to manage and sell the inventory.

The most remarkable bit of detail we uncovered in our 2010 research was that a canyon seems to have opened up between TV stations that believe fervently in the future of the Internet and those that see their online operations as mere marketing extensions of their station. Groups that were market leaders in terms of local online advertising share either maintained that share or grew it, while those with below-average shares tended to remain flat or lose share.

Looking forward, there are a few things broadcasters should focus on if they want to continue aggressive double-digit growth rates - or perhaps even triple-digit growth - in their online ventures.

·         Online video has a bright future. But there's as much risk in TV stations losing broadcast video advertising as there is gaining it online. Newspapers saw their classified advertising get peeled away by web classifieds, and yellow pages companies saw their directory advertising fall to the search engines. So might TV stations begin to see some of their spot advertising get peeled away by 10-second pre-roll in online video programming. A key strategy for TV managers is to look for more opportunities to deliver video advertising in more-creative ways than just that pre-roll; opportunities may exist in the recruitment and real estate categories, which have generally gone untouched by broadcasters. There are also those troublesome SMBs with small budgets; if broadcasters snub them to avoid "stepping over analog dollars to pick up digital dimes," their competitors in cable, newspapers and yellow pages are happily delivering low cost "commercials" to these new video-advertising clients.

·         Email advertising has an equally bright future, though tends to go untapped by TV stations. The delivery of information to individuals, as we've pointed out, can have a far greater power than posting content and waiting for Internet users to come to it. A key strategy for TV managers in this category is to find ways to begin collecting larger and larger lists of email addresses, whether through Groupon-like deals, weather alerts, daily news summaries, or contests and special offers. The growth and importance of mobile devices on the new-media landscape reinforces the need for this strategy as email-reading moves from the desktop to the smart phone.

·         Sales training (and retraining) is becoming a requirement to survive both the old media and new media environment. Advertisers are besieged by offers and probably both excited and confused by reports of door-busting campaigns from Groupon, wild response rates to text-messaging advertisements, and the basic ego-driven desire to get their company website above their competitors' on Google. A key strategy for TV managers is to ensure all reps have at least basic training in online sales, and that in-house online experts are available to accompany reps on more complicated calls with advertisers and agencies.

·         Incremental growth is achievable with barely an effort, which means exponential growth might be achievable with just a bit more. A key strategy for TV managers should be to determine how much market share they'd like to get. The highest achiever gets 18% of in-market online advertising. Most stations struggle with 1% to 2%. If 18% is achievable, it stands to reason that stations that perform around "average" in terms of market share could stand to double or triple their Internet revenues with some strategy tweaks, or perhaps just a little more effort.  - 2011 Borrell Associates Inc.

Just as we have mentioned before and fully cover in our seminar, this new Online advertising is not being added to the advertising budget, but being "peeled away from legacy media - primarily yellow pages and direct mail".

The "Conclusions and Recommendations" are primarily aimed at the television station. But advertisers should take heed. Many stations and many markets are far ahead of the curve and out-pacing many of their competitors. Advertisers wouldn't be buying this type of advertising if it didn't work. It seems that many sales staffs have some catching up to do. The advertiser can't take the ball and run with it and buy from those stations that have the expertise and know-how.