Local Online Ad Business Has Changed

The economic downturn over the past three years has forged a new landscape for local online media, according to Borrell Associates.  The slice of land held by the Internet“pure-plays” has stopped growing, and has stabilized at about half of the market. The biggest online entities also have increasingly formed partnerships with local newspapers, TV, radio and directories.

Newspapers still tend to generate the most money from an online venture in a given market. But for the first time, the pure-plays, principally Autotrader.com and the upstart Groupon, are the top providers in about 20 percent of the markets. Groupon, which didn’t exist two years ago, is already siphoning off hundreds of thousands of dollars in many markets and several million dollars in some. Both entities might wind up in the top position in more markets this year as Autotrader aims for 40 percent growth this year and Groupon seems bound for threefold growth.

TV stations and yellow pages companies continue to do well with about 11 percent share each, up from the past year. Radio stations, meanwhile, are languishing at a two percent share of all locally spent Internet advertising and appear to be barely treading water.

The future should be even more interesting as yet another disruptor — mobile media — emerges. Without mobile injecting new excitement into the “online” landscape, the traditional PC-based World Wide Web would likely see its ad revenues flat by now, having reached maturity.

In 2010, local online media accounted for 14.9 percent of all local ad spending, or $13.5 billion. Borrell forecasts growth to $15.9 billion this year, or 17.8 percent more. By 2015, for the first time ever, the firm expects newspapers to be toppled as the perennial king of local as online media reach $24 billion, for a 22.7 percent share of all local advertising.