When it comes to local advertising, it pays to be an information source rather than news outlet.
A new report from Borrell Associates found the three largest local online media companies are essentially advertising-only sites: AT&T’s Yellowpages.com, Autotrader.com and Groupon, which filed its IPO paperwork last week. In 44 of the more than 200 markets tracked in the research, either Groupon or Autotrader.com attracted more local advertising than the largest local media site. Two dozen local Groupon sites, which didn’t exist at all two years ago, will each generate more than $10 million this year. Even more surprising is the ad revenue generated by the very low-key Craigslist. The New York incarnation of the online classified site made $20 million last year.
Additionally, the pure-play sites seem to have identified midsize markets as the most effective gateway in their quest to colonize the local advertising ecosystem. The report suggested that those markets are without “the intense competition found in the largest markets and above the sparse advertising dollars in the smallest.” Pure-play operations were the top revenue generating sites in roughly one-fourth of the large markets, one-third of the midsize markets and only three percent of the smallest markets.
The various yellow-page publishers that 10 years ago were at the very top of the local advertising pyramid have seen their businesses migrate almost completely to the digital universe. Online revenue for yellow-pages companies is growing in double digits while the traditional print versions of the business listings have experienced a double-digit decline.
But even as consumers look more and more often to the Internet for their news and information as well as commerce, advertisers still have fears about shifting ad dollars from print to online advertising. The percent of gross revenues from online sales for legacy media companies remains relatively low. The study reveals that yellow-page companies derive only 16.5 percent of revenue from online sales; for newspapers, the figure is 11.1 percent.
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