• by April 15, 2003

A new report by Borrell Associates says Internet advertising aimed at local consumers is now bringing in $1.65 billion, or roughly 2.3% of all local advertising dollars. More than 70% of this revenue is derived from listings revenues such as classifieds and Yellow Pages.

The study, "What Newspaper Websites Earn," is based on market data and analysis conducted by Corzen Inc. It follows 2002-2003 Borrell research with Harvard Business School Professor Clark Gilbert on the Internet's impact on local media as a "disruptive" technology.

"Local advertising on the Internet is still under-performing in terms of advertiser penetration and dollars spent per advertiser," says Gordon Borrell, CEO of Borrell Associates Inc. "But it is gaining credibility in terms of results and will continue to improve as more local sites add targeting capabilities."

Newspaper websites were found to represent the largest share of local Internet ad dollars, with 40%. The study found that newspapers average $14.49 in annual online revenues per print subscriber. Newspapers were followed in local market share by online Yellow Pages, which comprise 24%, and by locally-targeted verticals such as Monster.com, Homestore.com and Autotrader, which comprise 21%. The three portals - AOL, Yahoo and MSN - cumulatively represent 12%, while broadcast television and radio stations comprise just 3%.

"Newspapers lead the way in local Internet advertising, and online Yellow Pages are holding their own. But newspaper share could be jeopardized by fast-rising 'category killers' such as Monster.com, who are gaining more leverage and continue to expand their online offerings," notes Peter Krasilovsky, Vice President of Borrell Associates Inc. "Part of the strength of these vertical specialists comes from their formidable, traffic-driving alliances with network portals like AOL, Yahoo and MSN."