After Google and Facebook scarf down most of the local ad pie, there's still $12 billion left

It is old news by now that Google and Facebook hog most of local digital ad spending. And Facebook, especially, has kept growing its share 50 percent year-over-year at the expense of newspapers and other local media.

But analyst Gordon Borrell in his latest benchmark report on local digital revenues suggests an alternate view: Even after the digital giants have gorged, that still leaves a "not too shabby $12 billion" for local players. And some are competing much more effectively than others.

Borrell names names of winners (The Washington Post, Dallas Morning News, Yelp) and losers (Gannett, Tronc, Angie's List) in digital ad growth rate in 2016.

But he also suggests what differentiates success from muddling along:

  • Top of the list is having a strong local digital sales force. "Do what the internet pure plays can’t do: Spend time with the customer, listen and serve. This means either partnering with, reselling or managing what your advertisers want to do with Google, YouTube, Facebook, LinkedIn, Twitter, Craigslist, Pinterest, and any other digital marketing company you don’t own."
  • "Expand digital service offerings. The larger, more successful media companies are finding that digital services are nectar that attracts the bees. Advertisers are interested in someone who can script and shoot a video infomercial and post it on YouTube. They’re interested in SEO, or how Facebook advertising works. They may be more in need of that advice than they are in buying an ad in your media because they see their digital presence as their advertising." An earlier Borrell survey found that 59 percent of local businesses plan to make major changes to their websites this year and 58 percent of those said they plan to seek outside help to do so."
  • A sense of urgency helps. "The largest (local market) shares are held by companies whose audiences and revenue streams have been threatened most and who have thus acted more aggressively to build digital products. These yellow pages and metro newspaper companies are getting one-third or more of their ad revenue from digital media. Meanwhile, those who’ve been less threatened in past years — broadcasting companies, and those with properties outside of urban markets — get lower percentages."

Borrell and his researchers think that one dominant digital player is emerging in most markets.  Most often that's a newspaper organization, for all of the industry's well-chronicled stumbles in strategy and pace.  But the dominant force can be someone else — the study cites Scripps TV and radio stations as outpacing the 27 percent digital ad market growth rate in 2016.

While the digital marketing service business is often built on an existing client base, Borrell sees a problem in relying too much on the advantage of those relationships.  About a third of active advertisers in a typical market do not buy digital and traditional media together. So that opportunity likely will be missed by a traditional broadcast or newspaper sales force.

Our reporting has had a focus on the current cascade of newsroom buyouts and layoffs.  But I'm left wondering whether under-investment in a next-generation sales force may be proving equally problematic for media businesses.

One of the strongest local players his survey found, Borrell told clients in a webinar Tuesday, is the family-owned Victoria Advocate in Victoria, Texas.  With a circulation of around 27,000, he said, they employ 25 people in digital sales.

In the webinar, Borrell researchers characterized the current digital ad competition as "a marathon sprint...If you're not growing as fast as the market (27 percent), you're shrinking.  You might say 'we grew 15 percent last year' — but not really."

This particular research paper was not a forecast, but Borrell acknowledged in an email that it is "inevitable, (in my humble opinion), that nearly all local media companies will continue to lose share."  That makes it all the more urgent, he said, to aim to be dominant in digital among local media companies.

(The report is free to Borrell clients and available for purchase to others)

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