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Station Groups Look Online For Alternative Ad Revenue

Jan 16, 2006  •  Post A Comment

Tribune’s decision to beef up its Internet presence in a bid to snag more online advertising dollars comes at a time when an increasing number of station groups are looking to the Web as a source of alternative revenue streams.

In just the past year, a number of station groups have dived headfirst into the digital age, beefing up their Web presence, expanding their offerings of streaming video, podcasts and content aimed at cellphones in an effort to capture a slice of the ever-growing online advertising pie.

One reason online advertising looks attractive is because there is a lot of room for growth. According to a study from Borrell Associates commissioned by the Television Bureau of Advertising, many TV stations still garner just a small portion of the local online advertising dollars spent, having ceded a lot of that business to local newspapers, which in some cases capture about 40 percent of local online advertising.

But that is beginning to change, Borrell’s data show. TV station Web site revenue hit $283 million in 2005, up from $119 million a year earlier. For 2006, Borrell is estimating it could be at least $410 million.

In some communities, Borrell says, local TV stations are grabbing 15 percent of locally spent online advertising. The study is based on an analysis of advertising revenue collected on more than 2,300 Web sites operated by local TV stations, radio stations and newspapers.

“Television stations have been asleep at the wheel for the last 10 years,” said Gordon Borrell, whose company compiled the data. However, he noted that as TV stations embrace the Web, “They can provide formidable competition to newspapers if they put some promotional effort behind it.”

Why the sudden change? Due to the ubiquity of broadband, streaming video feeds is now a lot easier, which allows TV stations to repurpose over-the-air content for the Internet as well as offer advertisers ways to reach consumers in more customized ways.

Intersecting with this trend is the rapid pace at which online advertising is growing. The Internet Advertising Bureau estimates that online advertising revenue will hit $12 billion for 2005, up from $9.6 billion in 2004, and analysts say television stations are poised to capture more of those dollars as they bolster their online activities.

Many station group executives are also searching for more stable sources of revenue to help smooth the swings that result from the on-again-off-again flow of political advertising dollars.

It’s also a matter of survival. Because of declining television viewership and a flood of new products that enable consumers to take control of how they consume entertainment, television stations are finding themselves having to rethink their old business model.

“Right now, quite frankly, we are on the precipice of change, and we’ve got two options: embrace it and jump in, or get pushed aside and not have options available to you,” said Jay Ireland, president of NBC Universal Television Stations.

“We can’t wait for 15- to 30-year-olds to turn into homeowners [before reaching them]. We have to reach them now on whatever platform they’re on,” Mr. Ireland said.