An odd thing occurred last year amid the relentless bashing of legacy media companies.
While Yellow pages and newspaper companies crashed into bankruptcy and TV and radio station revenues hit the brakes, their online hybrids zipped right along.
Last year $12.6 billion was spent in online advertising by local advertisers. Sales were dominated by pure-play Internet companies with no ties to legacy media – the likes of Google, Local.com, Interactive Corp., Marchex, ReachLocal and many others. However, for the first time since we began tracking local shares in 2001, pure-play companies lost ground. The second-biggest shareholder, newspaper companies, effectively arrested their online share decline in 2008 after losing an average of four points per year since 2005.
Could it be that the legacy media companies have finally turned their aircraft carriers? It’s possible, especially considering that they have an important asset that the pure-plays don’t: an estimated 98,000 feet-on-the-street salespeople who have existing relationships with local advertisers and can cross-sell online advertising products. And they are adding “Internet-only” sales reps at a rapid pace. At the beginning of 2009, this sales force numbered about 9,000, up 30 percent from a year ago.
The importance of online advertising to these legacy media companies intensified in 2008. Yellow Pages companies averaged nearly 11 percent of their gross revenues from online sales, while newspapers saw 7.0 percent and radio and TV stations 3.4 percent each. This dependence is likely to climb, bringing their online ventures into even sharper focus as they find ways to give the pure- play companies a run for their money.