Borrell on local media revenues: The good, the bad and the ugly

Gordon Borrell, CEO of Borrell Associates, told local media leaders at the Digital Revenue Summit  that in every local market one media company is 'gobbling up' share of revenues from the others  in a pie that is not getting bigger.  Here are his ten observations about local media and what market leaders are doing right. 

1. SMB´s feel ‘hoodwinked’ and ‘lied to’ about their media spending

First, Borrell alerted the room of top media executives about what SMB´s said that felt about advertising in the 2017 SMB survey,  and it is not good. 

“We are in a sea change. We are moving from the age of advertising to the age of influencing. From an age of great media control to an age where we do not get to control the spread of information,” he said.

SMBs preference for direct to consumer strategies like Facebook, he said, was only underscored by the results of the last presidential election, in which a media-savvy candidate won with a fraction of the advertising spend, proving that “You can no longer buy your way into office,” Borrell said.

“Advertisers are feeling that way too. From the small business survey comments, a lot of businesses feel that advertising is overrated. They feel hoodwinked by media and that and media has lied to them.”

“You should read their comments,” he said, referring to the survey.

2. In almost every local market, one media leader is ‘gobbling up’ market share from the others

“This is time of year, we collect what media companies are making in every market in digital advertising,” he said. “So yesterday I was looking at 10,000 markets and I saw something interesting that I had not seen before.”

The survey only looks at the ‘addressable market’, reversing out the share of revenues going to Google and Facebook, and leaving what local media companies can actually attain.

Those revenues, ie local media and market spend from 2016 to 2017 were dead flat. Within these numbers, however, some local media are shrinking and while one local media per market is taking over.

“If you look at any individual l market, you can see what happening,” he said.

“ There is a leader that is emerging in the every market and everyone else seems to be spinning their wheels. You better hope that (market leader) is you.”

3. Real estate is back, but ‘it needs to be addressed differently”

“A lot of media abandoned real estate, however, real estate...will be up this year again. The average price of a home is up 5%, home sales will increase 3.6% . We think it will be up more even more.”

They are spending on branding, but not necessarily traditional local media.

“There are 20 to 30 times as many as many real estate brokers as auto dealers, however they spend half as much on ads and three times as much on digital services.

“The key (for local media) is to sell everything they are buying. They are spending $30,000 a year on average just on social media management, plus average of 8.9 hours per week just to managing media.”

4. For SMBs that giant sucking sound is time, for local media it is a sales opportunity

The 8.9 hours realtors spend a week on managing DIY media is just the tip of the iceberg, Borrell said. SMBs overall are spending business crushing amounts of time managing social media and email themselves, and they are doing it badly, he said.

“SMBs believe in going direct to consumer, but they are spending more and more and more time and they are not the experts. 74% are novices, they have not put in the time and they are misfiring on the messaging.¨

He contends that media companies can help SMB´s to understand the amount of wasted time they are putting into marketing “and that you are the experts.”

5. Email is more important to SMBs than ever

“The number one marketing tool of any advertiser is still email,” Borrell said his survey showed.
But it is also another time-consuming tool.

“The average business manager spends three hours to craft a single email. The most difficult task is designing it and figure out what the message should be. A lot of them are spending an entire day crafting an email.

The SMB survey also revealed astounding fact about their email marketing, most are not using any kind of platform such MailChimp or Constant Contact. Most are simply using are Outlook or Gmail.

“Building up their  email list is also important. Even big businesses average only 2000 to 3000 opt-ins and their email lists suck.”

“If you can pull back the veil on the amount of time they are spending with all of these tools” for a less than spectacular result, the swing back to using a local media representative begins to make more send.

While Borrell acknowledged that email newsletter is not always high margin, “It is not an opportunity to important to their marketing plans.”

6. Political advertising is a skyrocketing opportunity

“The mid-term election year, we thought it would be 8.4 billion now 8.8 billion, had to raise the number since the beginning of the year,” he said.

In a market as tiny Dothan, Alabama, a “horrible place,” he said, “candidates are spending $.7 million ... 39% will go to TV, direct mail and newspaper. Digital will be about $2 million.

About 20 to 30% of the spend on mid-term elections will be i“down at the local level. “In Orlando (political operatives) will spend $103 million in political advertising, of which 20% is purely local.”

Borrell said the good news for local media is that political operatives are “swinging back to (media) they can trust because of the problems with Facebook and and Cambridge Analyticals. Year after year there will be dollars flowing.”

7. Go after local agency clients 
“Everyone thinks that we are competing with each other, but media is actually taking business from ad agencies. In our survey, more than half of agencies, identify local media companies as their chief competitor, so they know it,” he said.

A key characteristic of the top performing local media companies emerging as market leaders is that “they have stolen a regional or national client from an ad agency.”

He listed a few of these white whales The Victoria Advocate´s digital agency took a national brand in Walmart as well as large regional bank away from an agency. A TV group stole an auto parts company that advertises across the the entire West Coast.

8. Behave like an agency, not a media company

Local media cannot steal giant deals without behaving like an ad agency, and that is what the market leaders are doing, he said.

“You cannot do that (steal the big clients) unless you have really sophisticated digital services and can do some of the creative,” he said.

“These clients are not particularly looking for your media or your local station. Start thinking about what it would take to pitch an auto part store up and down the East Coast, or a national brand in Walmarts.

“The market leader in each market has begun to resemble more of an ad agency then a media company, doing the research and the placement” as well as selling their own media.

9. Grow your own local audience
Contrary to what this seems to be leading upto, the market leaders who are absorbing more and more market share are also growing their own brands.

“Market leaders have not abandoned their traditional media, they are all growing audience.”

10. Grow overall revenues, and rely heavily digital growth

The top performing companies have growth overall, combining  both digital and enterprise revenue. “What we see is print revenue declining offset by digital.”

While digital is growing 12% overall, local media who are market leaders are growing digital at the rate 20 to 40 percent.

“Digital marketing services should be at least 20% of total revenues,” Borrell said. At TV and radio stations, the share is slightly less, with 18 to 20% in digital revenues.

Companies you might not even think of are in this pack.  Lee Enterprises has launched digital connect, digital services, and is seeing 50% grow in digital since 2012. Now they have added a creative services group.”

“TownSquare (radio group) focused on digital services, now has 12,000 clients, offers full services, including hosting , redesign, mobile apps, seo, ad placement in programmatic networks.

In the elite group of media companies he also mentioned the Dallas Morning news, Hubbard, Advance, and Nexstar. “You don´t hear a lot about them, but the the amount of growth is stunning,” he said.

“Market leaders are getting 30% or more of the addressable market. Some are getting 60 to 70%.”

“Leaders emerging soaking up more and more market share. The rest seem to be asleep at the wheel. It is a really good time to be smart.”