Online Ads Growing Locally, But Not Fast Enough

(MoneyWatch)  The latest forecast for how local advertising dollars will be spent over the coming five years underscores just how dramatically and rapidly the transition to online advertising is becoming.

At the same time, the big picture for those existing on local ad revenue is bleak. According to the study, by BIA Advisory Services/Kelsey Group, overall local advertising spending will decline through 2013 -- from "$155.3 billion in 2008 to $144.4 billion in 2013, representing a negative 1.4 percent compound annual growth rate."

That is not a media recession, that is a media depression.

As for the rest of the numbers, here is what BIA/Kelset projects: "... the interactive share of local ad spending will more than double from 9 percent in 2008 to 22.2 percent in 2013. According to the forecast, the interactive segment (encompassing mobile, Internet Yellow Pages, local search, online verticals and classifieds, voice search, e-mail marketing and other interactive revenues generated by traditional media players) will grow from $14 billion in 2008 to $32.1 billion in 2013 (at a CAGR of 18%), while the traditional segment (encompassing newspapers, direct mail, television, radio, print Yellow Pages, out of home (non-digital), cable television and magazines) will decrease from $141.3 billion in 2008 to $112.4 billion in 2013 (CAGR of -4.5%)."

Of course, as we all know, five-year projections rarely work out (unless they are made and controlled by somebody like Chairman Mao), and there certainly are no shortages of opinions as to when and how robustly the economy will turnaround, which presumably will be the key determinative factor in all of this.

So, for me, the most salient takeaway for us in the media industry is that local online advertising, though today less than ten percent of traditional advertising revenue, will balloon to almost 30 percent of its offline cousin over the coming five years -- and that's good news.

But it will also be too little, too late for many media players, because it will still not be large enough (in volume or percentage) to underwrite the large-scale transition to online media for most local newspapers, TV and radio stations without significant cost cutting as well, which is why we can expect to continue seeing daily notices of more and more layoffs by those operations.

In fact, nothing envisioned in this report would cause that trend to let up -- even if the economy bounces back more quickly than the analysts at BIA/Kelsey think, downsizing local media newsrooms (including their IT counterparts) will inevitably continue.