The accelerating adoption of digital and social media is driving an audience shift away from traditional local media (TV, radio, newspapers) in the over $100 billion U.S. local advertising market, and we predict this shift will continue as digital channels continue to proliferate.1 Advertising budgets have naturally followed the audience, with an annualized advertising revenue contraction of “three to seven percent” forecasted through 2020.2 As audiences shift, broadcasters and publishers are experiencing demand and pricing erosion while competing against both direct digital substitutes (e.g., streaming music services) and digital complements (e.g., pay-per-click). Despite this, brand safety and other concerns increasingly suggest an over-rotation to digital by advertisers.
Traditional players must respond
Leaders of traditional local media must find ways to evolve their core offerings while pivoting their businesses to meet customers’ unmet needs. Local media is in an enviable position with existing advertiser and agency relationships and an ability to fulfill the "do it for me" need of many medium-sized local advertisers, who account for up to 80 percent of advertising revenue for many local media companies.3 Delivering on this potential requires making current products more valuable and easier to buy, participating in new channels, and expanding into new products/services.
Reasons for optimism
Despite the challenges facing local media, there is strong reason to believe that transformation will lead to success. There is an acknowledged over-rotation of advertising to digital, exacerbated by the growing frustration of advertisers with the "ad-tech tax" (shifting more dollars to non-working spend) and brand safety concerns, resulting in traditional media being undersold. All this while traditional advertising maintains differentiated reach, transparency, brand safety and a local flavor that cannot be easily replicated.
It’s time for traditional local media companies to change the conversation with their advertisers. By enhancing the value of current inventory, expanding reach, and launching new products/services, traditional local media leaders can reverse the trend of being undersold and unlock significant value.
1 BIA/Kelsey, “U.S. Local Advertising Forecast 2017,” October 2016
3 Accenture Strategy analysis
4 Accenture Digital, Supply Chain Analytics Research, 2017
5 The Economist, “Something doesn’t ad up about America’s advertising market,” January 2018