| What Local Media Web Sites Earn: 2008 Survey (Apr 09) |
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What Local Media Websites Earn: 2008 SurveyTable of ContentsKey Statistics from this report CHAPTER 1 – The Local Online Advertising Landscape
CHAPTER 2 – Local Pure-Plays: Small but (Very) Aggressive
CHAPTER 3 – Bechmarking Newspaper Web Sites
CHAPTER 4 – Bechmarking TV Web Sites
CHAPTER 5 – Bechmarking Radio Web Sites
CHAPTER 6 – Conclusions & Recommendations
IntroductionThis is our seventh year conducting this survey. This report analyzes Web revenues for 4,353 local media properties representing more than 6,000 individual Web sites in the U.S. and Canada1. The breakdown is as follows:
The newspaper, TV and radio data are projectable because of the large sample size. We continue to collect data for weekly newspaper and independent local sites for anecdotal purposes but we are unable to project those results to the full population of weeklies and independent sites. For Canada, the data include virtually all Canadian daily newspapers, as well as many of its weekly newspapers and TV stations. The questions we asked in this year’s survey were the same as last year’s, with the addition of questions about e-mail and mobile advertising. We did not include analysis in this report on all data collected, but will do so throughout the year in other published reports. This year’s survey requested information from 2008 regarding:
We solicit participation in our surveys by telephone and e-mail directly to companies. Participation is voluntary and without incentives. It is also con fidential We therefore do not furnish the names of participating companies, nor do we reveal market-speci fic data. Approximately 15% of our data is compiled via estimates derived from public company statements, not by direct report of individual properties. We supplement and test this data – as well as a select group of individual self-reported data -- via interviews with company o fficials and individual site audits of ad volume, rates, and advertiser interviews. By combining this information with our WebAudit™ spending estimates for each market, we are able to get a market-by-market glimpse at how well these local sites are competing with the pureplay Internet companies and other competitors for local ad dollars. 1Some local media companies operate several Web sites (URLs) in the same market.
EXECUTIVE SUMMARYAn odd thing occurred last year amid the relentless bashing of legacy media companies. While Yellow pages and newspaper companies crashed into bankruptcy and TV and radio station revenues hit the brakes, their online hybrids zipped right along. Many of them saw strong double-digit growth in their online revenues. Nexstar Broadcasting and Yellow Book even saw triple-digit growth. Last year $12.6 billion was spent in online advertising by local advertisers. Sales were dominated by pure-play Internet companies with no ties to legacy media – the likes of Google, Local.com, Interactive Corp., Marchex, ReachLocal and many others. However, for the first time since we began tracking local shares in 2001, pure-play companies lost ground. The second-biggest shareholder, newspaper companies, e ffectively arrested their online share decline in 2008 after losing an average of four points per year since 2005. Could it be that the legacy media companies have finally turned their aircraft carriers? It’s possible, especially considering that they have an important asset that the pure-plays don’t: an estimated 98,000 feet-on-the-street salespeople who have existing relationships with local advertisers and can cross-sell online advertising products. And they are adding “Internet-only” sales reps at a rapid pace. At the beginning of 2009, this sales force numbered about 9,000, up 30 percent from a year ago. The importance of online advertising to these legacy media companies intensifi ed in 2008. Yellow Pages companies averaged nearly 11 percent of their gross revenues from online sales, while newspapers saw 7.0 percent and radio and TV stations 3.4 percent each. This dependence is likely to climb, bringing their online ventures into even sharper focus as they nd ways to give the pureplay companies a run for their money. KEY STATISTICS FROM THIS REPORT5
5Figures for local newspapers, TV and radio stations represent total online revenues, not just local. Chapter 1 - The Local Online Advertising LandscapeLocal online advertising continued its growth jag in 2008, defying the gravity of the overall economy by growing 46 percent, to $12.6 billion. The growth was due mainly to smaller local businesses being forced to adjust their marketing dials for a more e fficient advertising mix. Many of them continued to trim their newspaper, Yellow pages and direct mail advertising while pushing more of their money toward less-expensive Web advertising. Local online advertising can’t grow forever, however. Based on what we’ve seen in the first quarter of this year, we are projecting a mild increase – 6 percent overall for local online advertising for all of 2009. This will be the first time local interactive ad sales have experienced single-digit growth year since we began tracking it a decade ago. Our forecast is calling for a rebound in 2010 as the economy improves and local advertisers become more con dent. But it’s still early in the year, and quicker improvement in the economy could push the final 2009 number higher
At the end of 2008, interactive spending held an 11.8 percent share of all local ad spending. We believe it is headed for a 15 percent to 18 percent share before leveling o within five years. If it reaches 18 percent, it will become the secondlargest share-holder of local advertising, behind newspapers. The types of companies sharing in that $12.6 billion continue to see domination by the “pure-play” Internet companies, which we de ne as those that are organized separately and have no ties to another legacy medium such as a newspaper, TV, radio station or Yellow Pages company. However, for the first time since we began tracking local shares in 2001, pure-play companies lost ground. The second-biggest shareholder, newspaper companies, saw a minor share loss of one-half point after losing an average of four points per year in 2005, 2006 and 2007.
Could “legacy” media companies be turning the corner? While they’ve generally been disadvantaged by interpreting the Internet only as a way to sell advertising on a “newspaper Web site,” “TV Web site,” or “Yellow Pages Web site,” many have branched out beyond the obvious. They are selling multiple Web sites and Internet products such as search engine marketing, search engine optimization, online directory listings, and e-mail advertising. These in-market media companies also have something many of the pure-plays don’t: An estimated 98,000 feet-on-the-street salespeople who have existing relationships with local advertisers and can cross-sell online advertising products8. In addition, our survey indicates that they are continuing to add “Internet- only” sales reps – though most of the legacy media properties have just two or three reps who sell only Internet products. At the beginning of 2009, this sales force numbered about 9,000, up 30 percent from a year ago. Budget information furnished to Borrell Associates for this year’s survey indicates that an additional 1,600 online-only sales reps will be hired this year, an increase of 18.4 percent. Many local media companies saw interactive become a more vital part of their overall revenue base in 2008. As legacy advertising sales declined and Internet sales grew, the percentage of gross revenues derived from online advertising shot up.
FIGURE 1.3: Yellow Pages Dominate the Conversion to “Multimedia” Revenues
Sources: SEC Documents, company statements, and Borrell Associates estimates. April 2009 © 2009 Borrell Associates Inc.
Yellow Pages publishers continued to lead the pack. Directory publishers claimed five of the eight positions held by companies achieving double-digit percentages of their total gross revenues from Internet sales. They also tended to have the highest online revenues overall: $770 million for AT&T directories, and $300 million each for R.H. Donnelley and Idearc. The next-highest legacy media companies were Gannett with approximately $280 million for its newspaper digital operations, New York Times Co. with $235 million, and McClatchy with $182 million. On average, Yellow Pages companies derived 12.3 percent of their gross from online sales, newspapers 7.0 percent, and TV and radio broadcast companies averaged 3.4 percent each. Yellow Pages companies are likely to see their reliance on interactive revenue continue to grow as their print revenues take a free-fall at the same time that their online-sales e orts accelerate. Idearc, for instance, recently estimated that its print directory revenues would decline 40 percent over the next five years, while its online advertising would double, from $300 million in 2008 to $600 million in 2013. At that point, online revenues would account for 25 percent of Idearc’s total revenue. Directory publishers have spent the past 18 months training their estimated 16,000 sales reps to sell an array of Internet products, including directory listings, Search Engine Optimization, Search Engine Marketing, Web sites, and streaming video. This puts them squarely on a collision course – or in tandem with – local pure-play providers such as Interactive Corp. (CitySearch), Local.com, Yodle, Marchex, ReachLocal, WebVisbile and LookSmart. Combined, these six pure-play companies had about $1.2 billion in local sales, compared with the Yellow Pages publishers’ estimated $1.4 billion in local online sales. While it may be too soon to declare any winners in this “pure-play versus legacy media” battle for local advertisers, an interesting thing occurred last year that suggests some of the glimmer may be fading from the pure-play companies. When we looked at 36 of the largest local media companies – pure-play and legacy media companies alike – that were selling online advertising we found that revenue growth at the legacy media companies far outpaced that of the pure-plays. The pure-plays in the table below generated $1.82 billion in local online sales in 2008, compared with $1.78 billion a year earlier, while the legacy media companies generated $3.0 billion in 2008, versus $2.5 billion a year prior. To be fair, this is not a complete sample. The revenue achieved by these 36 companies represents only 38 percent of all locally spent online advertising last year. And if we factored in revenue from Google, AOL Network and Yahoo (we did not because we can’t discern what portion of their revenues are “local” versus “national,” and because some of their ad revenues are actually shared with some of the local media companies listed), the gain for the pure-play companies would be closer to that of the legacy companies, at about 20 percent. FIGURE 1.4: Legacy Local Media Outpaced Local Pure-Plays in Revenue Growth
* Pure-play Internet companies; + = companies with $300m or more in online advertising; ^ = companies with less than $50m
8Source: Bureau of Labor Statistics, Borrell Associates Inc., estimated sales personnel employed at local newspaper, television, Yellow pages, magazines, and cable companies. Chapter 2 - Local Pure-Plays: Small but (Very) AggressiveWe’re often asked to identify the companies that comprise the pure-plays eating up all that local advertising. Most assume that it’s Google, and perhaps a few others like CitySearch or some locally operated independent Web site. The real story is – true to any assessment of local advertising – that it depends on the market. Some markets have very aggressive pure-play companies generating more than $5 million each; others have either very few or no in-market pure-plays, but a handful of out-of-market companies pecking away at local dollars. Pure-play local Internet operators generally fall into one of four categories:
While it’s nearly impossible to determine market-by-market estimates of local ad revenue for “the invisibles” and “advertiser-direct” pure-play companies, we can o er an assessment of local portals and local vertical Web sites. The scatter gram below shows the 2008 advertising revenue for 383 of these Web sites. The vast majority had revenues in the low hundreds of thousands of dollars. Some, however, were generating more than $5 million. Virtually all of those sites were operating in Top 50 markets, and most were highly-focused verticals, not generalized portals.
The phenomenon of the vertical sites is worth examining further. Craigslist is perhaps the best example. Though Craigslist has local sites in 326 US cities, the company charged for listings in only 18 of them – and only for employment advertising or for an apartment listing in newyork.craigslist.org. From only 18 cities, Craigslist generated an estimated $79 million last year, or an average of $4.4 million per city11. All without a single bit of local promotion, “news” content, or fancy Web site design. With the click of a link, Craigslist stands to generate an additional $50 to $65 million more this year with the simple addition of a $5 fee for “erotic services” advertisements12. The total revenues for Craigslist in 2009 might be in the neighborhood of $160 million. Another example of the strength of local-market vertical sites is AutoTrader.com, the “category killer” for used cars. While legacy media companies wring their hands over the loss of automotive advertising, AutoTrader.com has enjoyed a 34.3 percent Compound Annual Growth Rate over the past six years and – in the face of a disastrous year for automotive sales – saw a 20 percent increase in revenues in 2008. Since 2007 AutoTrader.com has been generating more revenue for its parent company, Cox Enterprises, than the once-formidable Auto Trader books.
The “invisibles” are also worth watching closely. Many are well-funded ventures such as Yodle, ReachLocal and Marchex and have enjoyed strong growth as local advertisers glom onto search advertising. They have been adding sales reps at a rapid clip, or are contracting with local media companies to sell their SEM products – or both. One of the strengths of these companies is that they’re o ffering one of the hottest-selling products out there: search advertising. They’ve also removed the obstacles to selling search advertising by o ffering simple Web sites to advertisers who don’t have one. Yodle.com even sells an 800-number to advertisers so telephone leads generated from the Web can be tracked. These companies have several thousand to tens of thousands of advertisers who typically pay between $2,000 and $3,000 for an annual contract – though the initial price points can be a lot less. Local.com is a good example. It generates 91 percent of its revenues from pay-per-click advertising fees, and only 5 percent from banner advertisements. It o ers its program directly to advertisers, as well as to agencies and local resellers. Local.com o ers listings management on Google, Yahoo, Yellowpages.com and Superpages.com, as well as on its own directory site, www.local.com. All this at a price point that most in-market media competitors would have a hard time selling – $49.95 per month.
Local.com surpassed $38 billion in revenue last year, a 78 percent increase over 2007. It continues to tweak its program and form alliances. In March it acquired 14,000 customers from LiveDeal, another one of the local pure-play “invisibles.”
9We classify AutoTrader.com as a pure-play site because it has been run by a separate company, with separate sta ffing apart from Auto Trader magazines. Chapter 3 - Benchmarking Newspaper Web SitesThe newspaper industry has had its woes, but online advertising hasn’t been one of them. At least not until recently. The growth rate for newspaper-run Web operations began easing in 2008, when newspapers saw an average increase of just 6% – their first single-digit increase since we began tracking their online advertising in 2002.
It is diff cult to predict where the industry will land at the end of the year, though we expect total revenues to increase 5.9 percent. The industry is clearly hoping for far more growth, fueled by excitement over partnerships with Yahoo to sell targeted banner advertising on the Yahoo platform. The APT program generated buzz from initial results in early 2009, but it doesn’t appear to be enough to lift Yahoo’s numbers. Yahoo reported a first-quarter revenue slide of 13 percent for its overall display advertising. While the installation, training and actual selling of the program by newspaper companies hasn’t had enough time to signifi cantly a ffect Yahoo’s revenues, it appears that banner advertising – targeted or not – is not what advertisers are clamoring for. The growth rates of search, streaming video, and e-mail advertising seem more like “skating to where the puck will be.” Meanwhile, many newspaper companies are indeed pushing beyond banners to the newer growth areas. McClatchy has been adding Internet-only sales personnel and reducing its dependence on “up-selling” print advertisers to the Web. In addition, McClatchy has attempted to drive past relying on the classifi ed advertising verticals and banner advertising and has been developing its search-based initiatives in sites like Triangle.com in Raleigh, Alaska.com, and SouthSound.com in Tacoma. Instead of focusing on the classic “news” Web site, these sites aim to deliver the more valuable newspaper content: Advertising.
Still, it will be a rough year for newspapers despite their sharp focus on developing Internet ventures. McClatchy reported a 4.3 percent decline in Internet revenues in the first quarter of this year. In general, newspaper companies remain overly dependent on the “Big Three” classifi ed advertising categories of real estate, automotive and recruitment advertising. Their struggles to develop Internet revenues can be tied directly to their dependence on these categories – all of which have experienced a catastrophic free-fall over the past eight years. In 2000, newspaper print classi fieds peaked at $19.6 billion. Last year they were half that, at $9.9 billion. The development of online classifi ed verticals hasn’t come close to making up the diff erence. Last year, newspapers generated about $2.4 billion in online revenue from classifi ed advertising categories, only about 25 percent of their annualized losses in print. Overall, newspapers remained most dependent on recruitment advertising through participation in programs such as CareerBuilder, HotJobs or their own help-wanted Web o fferings The average newspaper site generated slightly less than half its online revenue from the recruitment category, down from 60 percent just two years ago. Real estate and automotive were responsible for an average of about 11 percent each. The numbers vary by circulation size. FIGURE 3.3: Dependence on 3 “Classifi ed Advertising” Categories Remains High for Newspaper Web Sites
© 2009 Borrell Associates Inc.
We continue to benchmark newspaper Web sites on two key metrics: revenue per unit of print circulation, and share of online advertising spent in that newspaper's local market. The circulation benchmark is useful only from the perspective that the size of the newspaper might be relevant to the revenue its Web site can generate. We must point out, however, that this metric is becoming less relevant as many newspapers branch out beyond mere "newspaper sites" and use the Web to launch multiple products such as online directories, mobile applications or e-mail newsletters. It is likely that many smaller newspapers could be generating 10 times the online revenue of a newspaper with twice its circulation. In short, print circulation has less and less to do with a company's ability to generate signifi cant Web revenues. One reason for the rebound in online revenue per circulation unit for the largest-circulation newspapers – which saw per-circulation revenues decline in 2007 but then saw a huge jump last year – was the fact that the base of this metric, circulation, declined signifi cantly. Even though online revenues may have increased in the single digits for large newspapers, large declines in print circulation helped drive this metric up by $18 per unit of circulation. Larger-market newspapers continued to see erosion in their share of local online advertising while the smaller-market papers gained. We should note that these figures are for the major daily newspaper in each market, not for all newspapers. (Many large markets have dozens of smaller newspapers, which are not accounted for here.) FIGURE 3.5: Benchmarking: Newspaper Sites’ Share of Local Online Advertising by Market Size, 2008
© 2009 Borrell Associates Inc.
Other notable patterns we noticed in newspaper Web sites:
We also collected data on e-mail, paid search and mobile advertising for the first time this year. While less than 3 percent of the newspaper sites reported any revenues in these categories, those that did had significant expectations for growth in 2009. Many newspaper sites that reported revenues from e-mail were already generating hundreds of thousands of dollars from this category, and are expecting 30 percent growth in 2009. A few were likewise generating six-figure revenues from paid search, and were also expecting high growth in 2009. Mobile advertising revenues, however, produced the weakest response. Fewer than 1 percent of the respondents listed any revenues from mobile, and of those that did, the highest revenue was $85,000 – barely enough to pay the costs for any mobile application. Chapter 4 - Benchmarking TV Web SitesSales at TV Web sites hit $1.1 billion in 2008, 36 percent more than in 2007. We are forecasting a 26 percent increase this year, to $1.3 billion. Growth rates for TV sites are declining as revenues get bigger. TV Web revenues grew 73 percent in 2007.
An issue with TV sites is their reliance on one of the lowest-growth formats of interactive advertising – "standard format" display, banner and listing advertising. This caused a slippage in advertising market share in 2008, from 9.5 percent of all local online ad sales in 2007 to 8.3 percent last year13. The big issue for TV Web sites is whether they will be able to capture the highergrowth formats that are exciting local advertisers more than banner ads. These categories include paid search/online directories, e-mail advertising, and streaming video. While many stations are capturing larger and larger amounts from streaming video, it is typically from 10-second pre-roll commercials on video newscasts. For stations that reported revenue from video advertising, the average per-station sales for 2008 totaled $66,000 in streaming video, which amounted to 7.7 percent of their total revenues. The highest-growth video category, however, is longer-form opt-in "infomercials" purchased by the advertiser and displayed on the Web, typically in an online directory, classified ad, or "Ask the Expert" feature. As we detailed in the previous chapter, video advertising at some newspaper Web sites accounted for nearly one-third of all online advertising – and well into the hundreds of thousands for many of them. TV Web sites relied heavily on standard-format display advertising, deriving 77 percent of their revenues from banners and pop-ups. They captured an 18 percent share of search advertising. This came mainly from participation in the Google AdSense program that displays contextual advertising on a Web site, or from online directories.
TV stations continued to use the Web to gain on their most formidable inmarket competitors, newspapers. In 2007 there were 16 markets where the largest TV site drew more in-market traffic than the largest newspaper site. In 2008 there were 22, underscoring TV's ability to drive Web traffic despite the newspaper's depth of content from classified advertising, news, obituaries, calendars and local sports coverage. Overall, the largest newspaper sites increased their traffic by 7 percent, and TV sites increased by 10 percent. In the 22 markets where the TV site drew more than the largest newspaper site in 2008, the TV sites grew traffic by 21 percent and the newspaper sites grew by 11 percent.14 FIGURE 4.3: A TV Site Beat the Major Daily Newspaper in “In-Market” Unique Visitors in 22 Markets
* Audience is the cumulative number of persons logged on in past month. ^ These markets are part of larger DMAs™
TV Web sites began to see larger amounts of revenue from their Web operations in 2008. For the first time, the average per-station revenues for those in the Top 20 markets cracked $1 million, an increase of 65 percent over 2007. About 5 percent of all TV station Web sites made more than $3 million last year. No site in our survey made more than $7 million in online sales. Overall, the average TV Web site generated $652,000 in online sales last year. Small-market stations generally made less than $400,000 in Web sales, while large-market stations averaged nearly $1.4 million. Growth was uneven across markets, as per-site revenues for stations in Top 20 markets grew an average of 65 percent last year, while those in markets 21-50 saw revenues decline an average of 3.3 percent. We saw this phenomenon occur for newspaper Web sites in 2005. Newspapers in this market grouping (21-50) were quickest to embrace the Internet in 1996-98 and built out their operations faster than anyone – and thus were the first to see their revenues mature and slow down. For stations in markets 51-100, Web revenues grew 34 percent in 2008, and for those in markets 101-211, the growth rate was 31 percent. On a per-TV-household basis, stations'Web operations made between 67 cents per household in large markets and $1.64 in small. FIGURE 4.4: 2008 TV Web Revenue per TV Household and Per Station, By Market Size
n=522
While average per-station revenue is a good benchmark, we prefer to gauge a site's success on share of locally spent online advertising within its Designated Marketing Area (DMA™). The average TV Web site snared between 0.6 percent and 1.8% of that spending. By keeping an eye on market share, site operators can begin to pull away from "TV centric" measurements and gauge success against the overall growth of the Web, not just against how other TV-operated Web sites are performing. The more interesting numbers, however, are the "top share"for TV sites in each market category. These best-practice Web sites generate 3.5 to 9 times more revenue than average. For sites in some markets, the difference can mean several hundred thousand dollars, or even a few million. FIGURE 4.5: Benchmarking: TV Site Share of Local Online
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| Market Size | Share of Local Online Advertising |
Top Share of Local Online Adv. |
| 1-20 | 0.6% |
3.9% |
| 21-50 | 1.0% | 5.8% |
| 51-100 | 1.3% | 4.7% |
| 101-210 | 1.8% | 16.7% |
n=492
© 2009 Borrell Associates Inc.
Two key characteristics of these top performers are the number of online-only salespeople they have (they tend to have more individuals dedicated to selling nothing but online advertising, or assisting broadcast reps on four-legged calls), and the number of URLs they manage. Many of these sites sell advertising not only on their CallLetter.com sites, but also on other freshly branded sites they have launched.
As Figure 4.6 shows, quite a few TV-operated sites have risen above the highest "average" market share of 1.8 percent and are achieving 2 percent, 4 percent, and even as much as 16.7 percent of all locally spent online advertising.
When we examined the number of unique visitors that TV Web sites attracted, we found some interesting characteristics – namely, that some sites with small amounts of traffic generated a disproportionate amount of revenue per unique visitor – on the order of $25 to almost $70 – compared with the vast majority of TV sites generating $10 or less. Several TV sites were on par with revenues received by sites with two to four times as many unique visitors.
13The average individual TV Web site, depending on market size, captured between 0.6 percent and 1.8 percent of all locally spent online advertising. Collectively, TV stations captured 8.3 percent. See Chapter 2 for more detail on market share.
14The Media Audit measures only in-market traffic through its telephone surveys; since many newspaper sites get about 40% of their Web traffic from outside the market, their total unique visitors may be higher than these TV stations
Chapter 5 - Benchmarking Radio Web Sites
Unlike their more diversified legacy media competitors, radio operators remain focused primarily on selling banners on"radio station sites"or up-selling advertisers into their audio-streaming programs. For stations that reported audio-advertising numbers, it comprised an average of 39 percent of their online revenues. Revenue derived from streaming-audio commercials showed a 25 percent increase in 2008. This year, they were budgeting for no increase, most likely due to uncertainty in audio licensing issues.
A few stations began breaking out of the pack and making bold moves on the Internet. GAP/GAPWEST Broadcasting created Archstream Media to manage its digital assets and hired a former Belo Interactive manager with newspaper and TV digital experience, Vic Savelli, as its executive vice president. It then bought PegasusNews.com, the fifth-largest local news Web site in Dallas, from Fisher Interactive and said it would use the Pegasus software to develop community portals across multiple radio markets this year.
This move by a radio group to use the Web to go beyond selling banners on on a station-branded Web site is rare, but not unique. A handful of other radio owners have begun using the Web as a springboard to launch products that are directly competitive to newspapers, yellow pages and even direct mail competitors. These include Long Island Radio Group's www.yourli.com, a site aimed specifically at delivering coupons and special deals to the Long Island market, and Edwards Media Group's www.alpenanow.com, which offers news, sports, contests, and even obituaries for Northern Michigan.
FIGURE 4.5: Benchmarking: TV Site Share of Local Online
Advertising, by Market Size, 2008
| Market Size | Average Online '08 Revenue Growth |
Average Online Revenue Per Station |
Highest Revenue |
| 1-20 | 12.0% |
$183,22915 | $1.2m |
| 21-50 | 19.6% | $93,704 | $343,750 |
| 51-100 | 24.4% | $47,045 | $231,000 |
| 101-210 | 24.7% | $18,322 | $598,000 |
| Average | 16.4% | $84,247 |
© 2009 Borrell Associates Inc.
These ventures can prove to be very lucrative. In one case, a station group in a Top 30 market launched an opt-in e-mail campaign managed by Presslaff Interactive that delivers community information, news on concert pre-sales, and contest information to 35,000 individuals every week. The campaign generates about $14,000 per month from ads inserted in the e-mails – which amounts to twice as much as the average radio station makes from Web sales.
Average per-station Web revenues ranged from $18,322 for small-market stations to $183,229 for those in large markets. Top performers achieved between $231,000 and $1.2 million, depending on market size.
F IGURE 5.4: Benchmarking: Share of 2008 Local Online
Advertising for Radio Clusters, by Market Size
| Market Size | Average Share of Local Online Advertising |
Highest Share |
| 1-20 | 0.2% | 2.9% |
| 21-50 | 0.4% | 2.9% |
| 51-100 | 0.5% | 3.2% |
| 101-210 | 0.5% | 5.7% |
| Average | 44.0% |
© 2009 Borrell Associates Inc.
In terms of share of local online advertising, radio station clusters were still unable to break the 1 percent barrier. In fact, all station groupings saw declines in market share of about two-tenths of a percentage point last year, compared with 2007's share estimates.
As with many legacy media sites, the problem with share slippage is due to the radio industry's dependence on a form of Web advertising that has gone flat – banner ads. Higher-growth categories such ad online video advertising, e-mail and paid search or online directories are growing at much faster rates.
The relatively low performance of radio sites is surprising given the fact that radio listeners tend to take action on the Web after having heard something on the radio. In a survey that Borrell Associates conducted with Spacial Audio Solutions of 973 "online listeners" at 60 station Web sites earlier this year, 42 percent of the respondents said they were prompted to buy something as a result of something they saw advertised on the Web16.
15In last year's survey we reported the average for this marketing grouping at $460,865. The number has declined because a number of large-market stations, new to our database this year, reported relatively low Internet adverting receipts in 2008. This pulled down the average.
16Survey results: http://www.audiographics.com/agd/042409-1.htm
Conclusions and Recommendations
It is shaping up to be a very interesting year. Legacy media companies now have more than a decade of experience tackling the Web, and this year they have something new: deep-seated motivation to use the Web as a lifeboat. As legacy ad sales drop, the Web has taken up at least some of the slack.
Meanwhile, local Internet pure-play companies have the same motivation to survive, but for a different reason. The Web isn't just their lifeboat, it's their only boat.
What we believe is happening is that the pure-play companies have been able to sell, but now they're having a tough time renewing clients. Certainly the 60 percent average churn rates for search advertising are an indication of trouble in the local pure-play kingdom. What traditionally "sells" local advertising is a great pitch with an alluring potential for results. What sustains it, however, is a relationship – something that the pure-play companies' telemarketing and self-serve sales can't compete with. Local advertisers, particularly the smaller businesses, tend to trust their precious ad dollars with people they know.
What the legacy media companies lack, however, is a set of online products that take advantage of what the Internet can offer. Too many of them have viewed themselves as the customer of their online operations and built their Web sites in a way that serves their core needs of protecting news, classifieds and directory listing franchises. They have something to learn from the pure-plays.
We see two things happening over the remainder of 2009 – the same things we predicted two years ago, but intensifying: The coming together of big Internet pure-plays such as Google and Yahoo with local media companies, and the rapid addition of local "online only" sales staffing by legacy media companies.
The desire for these groups to work together is shared. Many are either exploring the possibility, already talking, or have already formed relationships with Yahoo, Google, Local.com, OrangeSoda, WebVisible and others. But the addition of online-only sales people has been slower than we would have expected, given the threat and the opportunity that the Internet presents to legacy media companies. Many of them continue to labor under the delusion that their existing print and broadcast sales forces can be successful selling a complex, lower-priced, competing product. While they indeed can sell it, there are three problems with that strategy:
- Legacy media sales staffs tend to migrate toward the higher-priced product, where they can make more commission. They also are more apt to want to give away the Internet as a "value added" or sell it at a steeply discounted price in order to save the legacy-media buy.
- Legacy media sales staffs tend to pursue legacy media customers. This fails to capitalize on using the Internet to build a new set of customers.
- We have yet to find an example of one advertising sales staff selling two competing media products and achieving a significant share in both.
Also, at the risk of stating the obvious, more salespeople generally generate more sales. The scatter gram below, taken from a sample of 278 Web sites, shows a strong correlation between the number of online-only salespeople and total Web revenues.
We expect to see many local Web sites go beyond the one or two "dedicated" salespeople they have on board this year. The same metric we've seen in the past continues to hold true, generally: Sites are generating approximately $250,000 in gross revenue per salesperson.
Our recommendations for local Web site operators are:
- For legacy media companies:
- Job 1 is maximizing the revenue opportunities on your Web site. The benchmarks in this report should be used to determine if you're at least getting the "average" market share.
- Job 2 is achieving "best practice" status among your peer group. Again, the benchmarks in this report will help.
- Job 3 is realizing who your competitors really are. If you're in the Internet business, your competition is anyone who's selling Web advertising. We believe an achievable best-practice share of local ad revenue is 30 percent for the market's top local Web operator.
- Launch separately branded URLs. There is a clear trend toward going beyond the Newspaper.com or CallLetter.com site and creating separate sites for tourism, moms, coupons, or health. These niche sites tend to fetch far higher CPMs for banner ads, and offer plenty of opportunities for other online ad formats.
- Build e-mail lists. Everyone seems to have missed the fact that e-mail is the No.1 use of the Internet. While only one-third of adults use the Web at least once a week, two-thirds use e-mail. People will sign up for e-mails alerting them to sales and special offers, and ad messages can accompany highly targeted e-mail newsletters.
- For pure-play Internet companies:
- Do something about churn. It may be a matter of sales training (over-selling), or it may be that the products just aren't delivering – or the advertiser doesn't know they are. An acceptable annual churn rate might be 30 percent on a new product line. Print Yellow Pages companies that serve smaller businesses on low-priced advertising tend to see less than 20 percent churn.
- Start talking to legacy media. They are looking for better products, and they have deep marketplace relationships and powerful promotional capabilities.
- Don't let partners slow you down. Work with the ones eager to understand the product (not just the revenue potential) and able to act quickly.
