Tough economy to leave few ad sectors untouched

The findings of a study released today by Borrell Associates should surprise no one: The credit crunch will cause growth in local online advertising to slow or even decline in 2009, instead of grow as previously expected.

This year, local online advertising has grown 47%. Next year, that’s expected to slow to 8% growth, while local offline advertising (print, broadcast, outdoor) will decline 1.4%. (An aside from a mere blogger: Frankly, if that’s all advertising drops offs, I will be shocked but I’m no analyst.)

Overall, Borrell predicts that the total U.S. ad market will drop more than 7% in 2009, a revision from the company’s previous prediction that ad markets would drop 2%.

“The credit crisis has magnified trends that were already in motion,” the study says. “For most of this decade, advertisers have been viewing interactive media as a more efficient, less costly way of reaching consumers than traditional media buys. ‘Adjusting the dials’ of advertising expenditures is normal business behavior in bleak economic environments.

“It can be seen in prior downturns as far back as 75 years ago, when radio advertising got a big boost (at the expense of newspapers) during The Great Depression, and 17 years ago when cable advertising

expenditures accelerated during the 1991-92 recession. The dials are just about adjusted for interactive media, with some final tweaking occurring next year.”

While that news isn’t great for TV stations, the news is, of course, worse for already embattled traditional media, such as newspapers, radio and directories. Next year, newspaper advertising is expected to drop another 4.5%, while “other print,” largely magazines, is projected to drop 5.4%. Advertising in the Yellow Pages and other directories is expected to dip 3.2%, while radio will decrease 4.3% and direct mail will drop 4.3%

My takeaway from Borrell’s report is that already-struggling local TV stations, who now need to focus even more laser-like on their Web offerings. NBC’s recent re-brand, in which the company is working to transform its local station sites into local go-to brands instead of the Web extension of the TV station, comes to mind. NBC’s done a lot of things wrong in recent years, but its Web strategy is right on track, in my opinion. TV stations need to go toward the growth, and that’s online.

Borrell also recommends that local media companies (and hell, everyone) move away from traditional banner ads because they aren’t particularly effective.

“We are expecting adecline in “standard” formats – banners, pop-ups, and interactive display in general – in 2009.As new advertisers move to the Web, they are less inclined to spend their newly-shrunken

ad budgets on traditional formats that they perceive to be less effective. The sparkle of banner advertising has dimmed, and advertisers are turning their attention toward newly sparkling formats that may hold greater efficiency: e-mail, paid search and streaming video.”

Among those “newly sparkling formats,” are national streaming audio and video, which Borrell expects to increase 137.7% in 2009; local streaming audio and video, which should gain 37.3%; local paid search, which is projected to improve by 17.6%; and national paid search, expected to increase 11.5%. Other growing forms of online advertising include national and local email marketing

 
Borrell reminds us of one thing that I found oddly comforting: “No form of advertising yet invented has grown forever.” So, while that’s indeed depressing like every other form of economic news we get lately – other than the fact that gas has dropped to $2.04 one block away from my house – at least it’s not a first. Nothing grows forever, not even the Internet.