With Forecast Grim, Investment Key to Local Media’s Future

BIA and The Kelsey Group’s Winning Media Strategies conference last week dissecting the local media scene was a supreme act of optimism at a time when even the rosiest predictions for local are dire. Few broadcasters attended the conference, which was populated primarily by vendors and analysts. Those that did heard a common theme from every panelist: a winning strategy implies investment, even when the economy and secular issues are hammering business.

For the near future, the local business looks grim. The group’s own forecast calls for local media to decline through 2010, finally reversing direction in 2011. In five years, local advertising will still be down from 2008. The biggest potential for growth: new digital platforms, predicted to make up nearly a quarter of the revenue within five years.

But, “There’s a fear of jeopardizing the core business,” admitted Neal Polachek, CEO of The Kelsey Group. Added Gordon Borrell, CEO of Borrell Associates: “A lot of people are unwilling to invest. They want to leverage what they already have. Stations can get a 30 percent share [of the local digital ad market], but they can’t do it cheaply.”

Ironically, it is local media that could ultimately be sitting in the cat’s bird seat as mobile devices become smarter and more ubiquitous and advertisers look to more precisely target consumers.

Advertising from the Web and mobile marketing could make up as much as 50 percent of revenue, estimated Ivan Braiker, CEO of HipCricket, a company that helps stations leverage SMS and other mobile marketing programs. Today, 54 million consumers use mobile Web applications; it’s forecast to grow to 95 million users by 2013. Smart phones, such as the iPhone, are getting easier to use, with 15 percent of iPhone applications local.

“Mobile gets you closer to the point of purchase because it goes with you to the store,” said Michael Boland, senior analyst for TKG, which forecast local mobile ad revenue to reach more than $3.1 billion by 2013. “That’s good for categories where sales leads are highly valued, such as retail, restaurants, and arts and entertainment.”

E-mail presents another opportunity for broadcasters, one that has been “overlooked,”, according to Borrell, which estimated that local email advertising will climb from $848 million in 2008 to $2 billion 2013, driven primarily by small businesses abandoning direct mail couponing and promotion offers. “Nearly two-thirds of Internet users check their email at least once a month, while one-third go to the Web,” said Borrell. “Yet most local media companies toil exclusively on the Web.”

Of course, the devil is in the details. While everyone agreed that digital initiatives needed to be treated as a business, not a hobby, less clear is how broadcasters should invest their dollars and what business models will actually deliver results. While there’s a lot of buzz about Twitter, Facebook, and YouTube, broadcasters should proceed with caution, said Jeff Smulyan, chairman of Emmis Communications: “There is a big difference between a social phenomenon and a viable business.”

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