Google CEO Larry Page has issued an ultimatum to all employees: develop a successful social strategy for the company or lose 25% of their annual bonus. That’s because Google views social as a way to create streams of relevant information generated for and by users, family and friends — much like Facebook’s news feed.
That’s precisely what more local TV stations and their corporate parents should do to salvage what their historic foothold in local, which is morphing into a hyper-local phenomenon rapidly transferring to Facebook and enterprising social mobile media players. These companies are changing the face of social mobile advertising and e-commerce in ways that will permanently suck revenues out of traditional ad-dependent media and local TV stations.
The latest advertising spending numbers point to new vulnerability in TV station’s life’s blood and reasons why grassroots broadcasters no longer can inch their way into a digital age. Instead of just losing economic ground to traditional national media players, TV stations also are forfeiting their turf to social commerce players, such as GroupOn, Autotrader.com and Gilt Groupe which capitalise on consumers’ immediate local needs and interests.
These engaged, mobile interactive consumers are unlikely to return to the stoic TV experience as a main source of local content and advertising. A fragmented local advertising market comprised of small businesses under economic duress must go online, social and mobile to cost effectively connect with target consumers.
In less than two years, Facebook has become the dominant source of online user data and is rapidly becoming one of the Web’s premiere advertising destinations, according to Wedbush Securities analyst Lou Kerner. Facebook is furiously working to equalise its market share in display ads that far outstrips its share of total spending on such ads.
The top five local online media companies tracked by Borrell Associates (AT&T Interactive/Yellowpages.com, Autotrader.com, GroupOn.com, CareerBuilder and Yellowpages Canada) derive all content from their own advertisers. In fact, half of the Top 20 are all-advertising sites, demonstrating a wiliness by marketers to sidestep local TV broadcasters, which have been especially slow to make the transition to online, Borrell observes in a recent benchmarking report.
While pure-play online ad-based companies from Google to Zillow increasingly partner with legacy media companies to strengthen their advertising position, a majority of TV stations draw ad dollars from newspapers with static banner ads and some video, and only scant participation in the booming mobile advertising market.
For local TV broadcasters, this is no longer just about making the leap to the Web; it’s about going social and mobile in ways that make local news, advertising and other products relevant to individuals on the most personal, on-the-go terms. The entire $90 billion local advertising market across all media is at stake — in particular the 15%, or $13.5 billion in all local ad spending, that is rapidly shifting to more effective interactive platforms.
Without the fledgling mobile advertising business, local online advertising would remain flat for the foreseeable future, says Borrell. By 2015, a majority of all online advertising (as well as local online advertising which should double to top $24 billion in annual revenues) will be delivered exclusively to mobile devices, such as iPads and other e-tablets, smart phones and GPS-enabled laptops.
“If our forecasts are correct, the local media landscape five years from now will be dominated by online media,” Borrell says. It would be the first time newspapers would not be the buy for local businesses — a prospect that also challenges the growth opportunities for local TV, which would slip to a distant third, or even fourth in local online ad spending.
Despite the notable strides made by some TV group owners, such as Gannett, Hearst, McClatchy, CBS local and the Washington Post Co., TV stations need to get in the social mobile game faster and deeper in order to survive. The Internet pure-plays are in a clear fight with legacy media companies for control of the online media arena.
Barclay’s Capital analyst Anthony DiClemente is leading a growing chorus on Wall Street voicing concerns about the ability of traditional local media-and TV stations in particular-to rebound. Here are some of the trouble signs DiClemnete highlights in a new report:
*In addition to shifting more of their ad budgets to the Internet, local advertisers will continue to favour national media’s reach and economies of scale.
*The economy is still taking its toll. Some automotive advertisers have been reducing their ad spending to conserve inventory, due to supply chain disruptions caused by the recent earthquake in Japan. Toyota recently cancelled its TV ad spending, and Honda has declined to commit to second quarter ad buys.
*Food companies are more likely to reduce than to increase advertising in the wake of inflationary pressures they cannot fully offset with pricing and productivity measures. As inflationary pressures intensify, other local advertisers, such as restaurants, personal care product and other retailers, will pull back on their ad spending. General Mills and ConAgra have already reported year-over-year declines in ad spending, DiClemente says. Telecom companies, which comprise the second-largest ad category, also will see some reductions as a result of consolidation of marketing budgets due to mega mergers such as the pending AT&T and T-Mobile union.
*As a result, two of the nation’s largest TV station group owners –Belo and Gannett — recently lowered their first-quarter revenue guidance due to difficult year-ago comps primarily due to last year’s Olympics and Super Bowl. Put another way, the rebound in general first-quarter local advertising has been insufficient to offset the special spending. That could become the status quo this non-election year with no influx of political dollars that have traditional shored local TV.
Overall, advertising spend remains well below historic levels. Even if U.S. ad spending reaches an estimated $188 billion in 2012, that would be below 2005 to 2008 spending levels, DeClimente points out. If online, social and mobile advertising represent the only robust growth segments, any media wanting to stay in the game must embrace them with conviction.
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