Groupon, Autotrader Rise In Local Space

By Eric J. Smith

NetNewsCheck, March 28, 2011 10:59 AM EDT

The local advertising landscape has dramatically changed in the past few years, with national Internet pure-plays Atuotrader.com and Groupon taking the lead in generating advertising dollars in many local markets, according to a new study released today from Borrell Associates.

While newspapers still dominate when it comes to generating local online advertising dollars, Internet pure-plays -- specifically fledgling daily deals site Groupon and car marketplace Autotrader.com -- have made huge gains in the space, bringing in the most money in about one-fifth of the markets covered in the study. Both sites could muscle out papers in even more markets by the end of the year, as Autotrader is forecasted to see 40% growth and Groupon is expected triple in size, according Borrell’s “Benchmarking Local Online Media: 2010 Revenue Survey,” which looked at the revenue of 4,588 local entities.

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Despite Groupon and Autotrader’s gains, Borrell found that the piece of the market controlled by Internet pure-plays has stopped growing. Between 2000 and 2008, pure-plays grew to control 48% of the local ad market, but have hit a plateau, with some companies forming partnerships with local newspapers and television stations and others shutting their doors.

The study also found that content from advertisers was an important driver in the online space. “News and information sites do indeed generate revenue, but the Top 5 local online companies derive all their content from their own advertisers. In fact, half of the top 20 are all-advertising sites,” according to Borrell.

One of the other big trends is the growing gap between traditional media companies that are gaining share in the local digital space and those that are losing it. The study found that the most aggressive media companies are generating 20% or more of their advertising revenue from digital sales. Companies that have not paid as close attention to their online efforts saw digital revenue decline or stay flat over the past year, the study said.

The study found TV stations and yellow pages companies are still thriving, pulling in 10.5% and 11.3% of the of the local advertising pie, respectively. At the other end of the spectrum are radio stations, at 2.1%; magazines, at 1.7%; and cable television, at 1.2%.

In 2010, Local online media accounted for 14.9% of all local ad spending, or $13.5 billion, and it is expected to increase 17.8% to $15.9 billion in 2011, according to Borrell.

“By 2015, for the first time ever, we expect newspapers to be toppled as the perennial king of local as online media reach $24 billion, for a 22.7% share of all local advertising,” the study said.