Local online advertising will once again be hot in 2008; that hasn’t changed. What is changing, however, is how this advertising is delivered, compared to past years when banners and pop-ups dominated, and who is selling it. That’s according to a new report from Borrell Associates, the Williamsburg, Va.-based media research firm, which predicts that local web advertising revenue will jump 48 percent in 2008, from $8.5 billion this year to $12.6 billion. Local search and online video will drive the growth, with both forecast to more than double over 2007 while more traditional forms of internet advertising like pop-ups, banners and listings become less popular. Borrell also sees some major changes in the way advertising is sold. Local TV stations and newspapers are starting to realize that they must install sales staffs dedicated to online sales only, to better compete in the marketplace. This year, out-of-town media companies that specialize in the internet for the first time generated a larger share of local advertising than in-market companies, and Borrell predicts that gap will continue to widen. Colby Atwood, president of Borrell Associates, talks to Media Life about the rise of pure-play companies, what media people should know about local online advertising, and how political ads will impact the market.

What's the most significant or important thing for media buyers and planners to take from this forecast?
 
Any media planners or buyers who aren't presenting online campaigns to their local clients are behind the curve.

Local advertisers are recognizing that the web can deliver measurable incremental sales and database enhancements, and they know they have to run to keep up with national advertisers that are reaching into their back yards for customers. They are looking for help understanding how to do this economically.
 

What did you find most interesting or most surprising about it?
 
I am intrigued by the pronounced move out of "traditional" forms of online advertising--banners, tiles, pop-ups, listings--and into promotions and public relations.

The first generation of internet ads were simply transplanted forms from the preceding media era: display ads, listings and pre-rolls have been with us for a long time.

Now people are starting to understand how to use this new medium in ways that are unique to it. There's certainly never been a more interesting time to be in marketing or advertising.
 

You say that next year "will be a perplexing one for local media companies trying to tackle the web." Why is this so, and what are the major issues facing local media companies?
 
Local media companies did the natural thing when the web came along: they figured out how to sell it to their existing customers. In the process, they picked up a lot of low-cost sales, and this revenue got their online operations off the ground. It also helped the local properties show some impressive profit margins because the incremental cost of an up-sell is so low.
 
Now, however, the strategy of relying on print or broadcast salespeople to also sell online ads is bogging down. The pool of advertisers served by the parent medium has been tapped for online sales. Plus, that pool is shrinking anyway.

So now online revenue growth is slowing for these properties, even while the local online ad market is blossoming. Local media company sites simply must start selling aggressively to customers who have never done business with them before.
 
The only way to do that is with an online-only sales staff. And that is still a tough nut for some publishers and general managers to crack.
 

You predict that classified ads for auto, recruitment and real estate will be key to growth. But will there be any impact from automakers' general advertising pullback and the softness of the current real estate market?
 
A general cooling in the overall ad market will take some of the edge off the growth in local online ad sales, but there is still a lot of room for growth in the Big Three, especially when you consider that car manufacturers are not the core of local online auto ad sales, and real estate agents are trying to move a lot more inventory than they have in the recent past.

The opportunities with video and with networks will help maintain the sizzle in these verticals.
 

You found that so-called "pureplay" companies -- ones that aren't tied to traditional media companies -- captured the greatest share of local online ad revue, continuing to eat into local newspapers and yellow page publishers' share. What is driving this phenomenon and do you expect it to become even more pronounced over the next few years?
 
The pure-plays will continue to be the strongest competition that local media company sites face. To compensate for the fact that they don't have feet on the street and a long tradition, pure-plays have developed very impressive technology-based advertiser interfaces that eliminate the need for personal sales calls (e.g., Google) or have honed a product and a pitch to a particular vertical market segment that beats any general offer from a local site (online specialty directories for plumbers, accountants, B&Bs, etc.).
 
From 30,000 feet, it makes some sense for local media companies to band together to face their common threats.
 

What are some of the biggest changes you saw in local advertising components this year, and what do you predict for 2008?
 
The shift out of banners ads and into search, email, video and promotions was significant, and we expect those trends to continue through 2008.
 

How much do you expect online video advertising to grow in 2008? Why?
 
Our report estimates that local online video ads will triple, from $400 million to $1.3 billion, in 2008.
 
A major driver is the increasing penetration of broadband into homes. Another is the proliferation of inexpensive video recorders that produce very decent images for the web. And a third is the competitive advantage that local advertisers see in distinguishing their home, car or job offer by including a video component.
 

How will political advertising impact local online ad spending next year?
 
Most political spending related to the web in this cycle is for the development of sites for the candidates or issues, volunteer coordination systems, and public relations/promotions efforts such as viral marketing campaigns; relatively little of it actually goes into paid online advertising.
 
So while there are opportunities for local sites to secure some revenue boosts from political advertising, most of the opportunity for them will be the area of promotions.