• by Gavin O'Malley  @mp_gavin, April 30, 2009

Based on its performance thus far, local online advertising will grow a mere 6% this year, according to a new report from research and consulting firm Borrell Associates.

"This will be the first time local interactive ad sales have experienced single-digit growth year since we began tracking it a decade ago," wrote the report's authors.

Last year, meanwhile, as Yellow Pages and newspaper companies filed for bankruptcy, and TV and radio station revenues stalled, their online hybrids "zipped right along," according to the annual report analyzing Web revenues for 4,353 local media properties representing more than 6,000 individual Web sites in the U.S. and Canada.

Many saw strong double-digit growth in their online revenues, while Nexstar Broadcasting and Yellow Book even saw triple-digit growth.

Overall, $12.6 billion was spent in online advertising by local advertisers last year, according to Borrell, which represented a 46% increase year-over-year.

"The growth was due mainly to smaller local businesses being forced to adjust their marketing dials for a more efficient advertising mix," according to Borrell. "Many of them continued to trim their newspaper, Yellow Pages and direct mail advertising while pushing more of their money toward less-expensive Web advertising."

Not surprisingly, sales were dominated by pure-play Web companies with no ties to legacy media, including Google, Local.com, Interactive Corp., Marchex and ReachLocal.

However, for the first time since Borrell began tracking local shares in 2001, pure-play companies lost ground. The second-biggest shareholder -- newspaper companies -- effectively arrested their online share decline in 2008 after losing an average of four points per year since 2005.

"Could it be that the legacy media companies have finally turned their aircraft carriers?" the report's authors ask. "It's possible, especially considering that they have an important asset that the pure-plays don't: an estimated 98,000 feet-on-the-street salespeople who have existing relationships with local advertisers and can cross-sell online advertising products ...And they are adding 'Internet-only' sales reps at a rapid pace."

At the beginning of 2009, this sales force numbered about 9,000 -- up 30% from a year ago.

The importance of online advertising to these legacy media companies intensified in 2008, according to Borrell.

Yellow Pages companies averaged nearly 11% of their gross revenues from online sales, while newspapers saw 7% and radio and TV stations 3.4% each.

This dependence is likely to climb, Borrell predicts, bringing their online ventures into even sharper focus as they found ways to give the pure-play companies a run for their money.