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Borrell: Digital Pureplays Gobbling Up Local Share

Has the train left the station?

In 2015, it’s clear that targeted banners and video advertising will be hot, and paid search and static display won’t be.

That’s part of a forecast prepared by Borrell Associates, which says targeted display has grown to the point at which it will comprise 59% of all digital advertising this year. The growth of programmatic networks, where advertisers increasingly buy demographics instead of “sites,” is part of the reason that sales of targeted display will nearly double in a year’s time.

There’s also what Borrell calls “the mobile effect.” Last year, 38% of all online advertising was delivered on a mobile device. By 2019, Borrell expects it to be 70%.

Media companies are evolving into four types, concludes principal author CEO Gordon Borrell: “Traditional media companies stuck in the analog world, selling a little digital stuff because it’s easy, but not really believing there’s good money in it; traditional media companies that are more excited about the prospects but still reticent (or unable) to invest more in order to grow quickly; and traditional media companies that have seen the light and are determined to grow again, investing heavily in digital by hiring people or acquiring companies.”

The fourth type is the “Pureplays” and there are thousands of them.

“True to predictions, they have gobbled up share at the local level,” said Borrell. “In 2015, these independent companies will account for nearly three-fourths of all digital advertising, elbowing out local-media competitors who have tried for two decades to use their existing sales forces to also sell digital advertising.”

If local advertising were a train, digital would be its locomotive, first-class passenger car and dining car, according to the forecaster. Local continues to be responsible for nearly all growth in advertising, accelerating at a rate of 40% last year and forecast rate of 42% this year. “It even seems to be dragging along print and broadcast media — the coaches and caboose — which are now frequently bought by advertisers in order to drive digital action,” according to the forecast.

Traditional print and broadcast media are still a significant market force. At the end of 2014, they accounted for more than two-thirds of all advertising buys. But, digital has gained share faster than another “new medium” over the past century.

Borrell notes it took radio 25 years to peak at a15% share of all advertising by the late 1940s, and it took television 34 years to peak at a 22% share. Digital blew past both of those markers in 12 years.

This year, total local advertising is forecast to grow to $115 billion, up 11.3% over 2014. Digital advertising is forecast to reach $47.8 billion, accounting for two-fifths of all expenditures. That type of share hasn’t been seen since 1998, when newspapers peaked at 40% of all local ad expenditures.

Radio accounted for nearly $15 million in 2008, and is projected to drop to nearly $11 million in 2015.