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.
1. Enhance value and appeal of existing inventory
Digital marketing has reshaped advertiser expectations for buying media by infusing data and eliminating friction in the buying process. Recent Accenture research finds that nearly three quarters of companies see digitization, analytics and intelligent automation (DAA) as a top priority.4 For local media companies, this means making investments that enhance the value provided by existing offerings to meet these new advertiser expectations. By combining owned audience data (e.g., owned & operated web, OTT streaming) with third party consumer data (e.g., audience measurement, consumer transaction), broadcasters and publishers can create a data layer to better profile audiences. This enables the use of analytics for advanced targeting, allowing sales teams to sell audiences rather than campaigns, and create accountability with cross-platform reporting and attribution. Traditional media buying is also plagued by long lead times, poor accuracy, and numerous "make-goods." Automation can address these issues and drive greater overall operational efficiency by making traditional inventory available via programmatic buying, a channel already demanded by sophisticated, national buyers.
2. Expand reach and services offered
With existing inventory optimized, the next logical step is to participate in new channels to maximize the reach of potential buyers and expand advertising related services. By selling traditional and digital media across all platforms and developing a complete set of marketing services capabilities, traditional media organizations can become a "one-stop-shop" to reach local audiences. To this end, we recommend complementing existing linear inventory with a full suite of digital products including search, social, email, display and retargeting. There is a danger of falling into the trap of reselling digital inventory at low-margin, therefore local media leaders need to expand their capabilities to offer higher-margin, "smart" marketing services, including marketing strategy and planning, customer data management, personalization, content development and multi-channel attribution. This requires building new data and service oriented capabilities or finding a partner who can provide them.
3. Launch new products and services
Given ownership caps in many markets for traditional media assets and a natural limit to the headroom for advertising growth overall, averaging 1.3 percent of GDP in the U.S., local media companies need to think differently about their businesses if they seek transformational growth.5 This requires thinking more broadly about assets—for many, these assets include local brands, a local salesforce, and trusted relationships. Capitalizing on these assets and creating deep understanding of unmet needs can open the possibility of selling adjacent products and services demanded by local businesses (e.g., HR and Benefits advisory, IT services, etc.) either directly or with partners. Some of our most forward-thinking clients have made this pivot in their search for new growth and are finding success in the traditionally underserved mid-market.
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