Just a few years ago, the idea that online consumers would pay monthly fees for local news content would have seemed farfetched. As new research shows, however, that's exactly what’s happening. Even more remarkable, millions of consumers are now paying to access Yellow Pages listings with reviews.
Remember the saying ‘Information wants to be free?’” asks Gordon Borrell, CEO of Borrell Associates and principal author of the report. Well, today, “millions [of consumers] are paying to access directory listings,” he says.
As a result of these and similarly industry-friendly trends, the market for local online media did quite well in 2012. In fact, the average EBITDA (earnings before interest, taxes, depreciation, and amortization) margin for local digital operations that are leveraged out of traditional media companies was 49% last year.
“Driving the figure [was] the fact that the vast majority aren’t charging for rent, advertising and content -- things that are already paid for by the host company,” according to Borrell. Yet even “pure-play” companies were able to report margins of 20% to 30% last year, the report found.
If current trends persist, digital ventures could be contributing half of company profits to these media companies in five years, Borrell predicts. Of all the entities selling digital advertising, newspapers averaged $2.2 million per site last year -- 50% more than the next-highest competitor.
Spending by local business on media increased 20% in 2012 and is expected to jump 31% this year. Borrell Associates bases its findings on analysis of 6,284 local operations and online ad-spending forecasts for 513 U.S. digital marketing regions.
Among other entities, these include more than 2,000 radio stations, nearly 1,000 daily newspapers, and almost 1,000 Internet pure-play operations.