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Advertisers Expected To Spend $1.1 Billion For Local TV Online This Year: Report

Posted by Mort Greenberg on April 10, 2008



By David Kaplan – Fri 28 Mar 2008 12:17 AM PST

Local TV stations are expected to make more than $1.1 billion for online advertising this year, up 45 percent over 2007, according to a report by Borrell Associates, which offers a similarly bright outlook for online TV and the local web spending in general. The report, conducted on behalf of Television Bureau of Advertising, a local station trade group, gathered data from 534 TV stations from Borrell’s database of 3,096 local web properties.

While Borrell said local TV operators generated $772 million in internet sales 2007, for a growth rate of 72 percent over 2006, this year’s 45 percent slower growth is the result of the law of large numbers – a factor cited in the online space’s reduced growth rate overall. Still, considering most online advertising growth rates are well under the 30 percent highs of the past few years, local’s expected gains are still more than healthy. To put individual TV stations’ online revenue activity within the larger context of a local online ad surge, Borrell is forecasting total local ad growth of $13.01 billion by 2012, with $9.89 billion this year, compared to $7.63 billion in 2007 – a 29.6 percent increase. Some more details from Borrell’s TVB report (not available online) after the jump.

Ending convergence: In a study on local online advertising in November, Borrell argued that bundling traditional and non-traditional media under one ad sales team had a dampening effect on the growth on internet revenues. Looking only at local TV, Borrell finds that most are adding online-only sales reps in an effort to sell a growing stable of unsold web inventory. The report finds these sales teams have their work cut out for them: ”Nearly three-fourths of all TV site inventory is unsold. Looking ahead, TV sites should continue to gain share this year in most markets, topping $1.1 billion in online ad revenue overall.” Additionally, it helps to keep in mind that digital ventures remain a small piece of the broadcast TV puzzle; it’s barely 3 percent of most stations’ total revenues, leaving many station managers to doubt the wisdom of adding online resources.

Just getting started: Much of the revenue increases local online saw last year was fueled by stations in smaller markets just getting serious about online sales. Companies such as Belo (NYSE: BLC), Hearst-Argyle (NYSE: HTV), Gannett (NYSE: GCI) and LIN Television saw increases in the 35
percent to 60 percent range
. But new-to-the-net upstarts such as Nexstar TV posted growth north of 600 percent, as its
online revenues went from less than $500,000 in the first half of 2007 to more than $4 million in the second half.

Revenues vary: Borrell also benchmarks stations against TV households. The range for internet revenue per TV household was 36 cents for large markets, up to $1.28 for small markets. While it may be an easy-to-grasp benchmark for television operators, Borrell said it is generally irrelevant because the reach of the internet extends well beyond a stations’ broadcast signal. That said, not all sites are created equal. In large markets, several stations were making more than $3 million in online-only revenues, while others were pulling in less than $500,000. In a market where one station was making more than $4 million, a competitor in the same market was making $1.4 million, while three others were making less than $500,000 each. In the smallest markets, a handful of stations were generating more than $1 million, while their peers were laboring in the $100,000 to $200,000 range. 

Pricing and share: The majority of sites are pricing web inventory at flat rates – an easy sale for the advertiser because it simplifies the product. One-fourth are pricing it by CPM, and the rest are offering bundled rates with a broadcast TV schedule. Borrell found video pricing for video-player sponsorships and in-stream video advertising too varied to summarize. One respondent listed pre-roll CPMs at $153, one listed a $750 flat monthly rate, and several others listed CPMs in the $15 to $35 range. As for the share of local online advertising for TV sites, the average ranged from 0.5 percent in large markets and 1.8 percent in small markets. However, a handful of sites are getting 10 times the average.


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