• by Erik Sass , December 20, 2007

A new report from Borrell Associates, a consulting and analysis firm that studies the newspaper business, shows local newspapers losing local ad revenue to online-only competitors on the Web, despite attempts to build their audience and offer more sophisticated advertising programs.

According to Borrell, online-only Web players attracted 43.7% of the total $2.7 billion spent on local online ads in 2007. This growth is coming at the expense of local newspaper Web sites, which got just 33.4% of the ad spend--down significantly in percentage terms from 2004, when they grabbed 44.1%.

To assure themselves of a steady stream of local online revenue, many local paper Web sites have partnered with online companies that operate newspaper networks, including Yahoo's newspaper consortium. But these deals cut both ways: Sharing local content with big online companies may prove dangerous in the long run, as news aggregators serve readers the content as a final destination, rather than sending them onto the Web sites of individual papers.

Some alternatives do exist that don't require newspapers to share content online.

For example, a company called Centro has partnered with about 4,000 local publishers to create something like a national online network for display ads. Centro's system allows advertisers to purchase display ads on any scale, from a single site to regional or demographic buys, to a run-of-network campaign. Shawn Riegsecker, Centro's founder and CEO, says the company handles about 50% of all display ad placement on local newspaper Web sites.