A new report from Borrell Associates Inc looks at local online video advertising which was had a $161 million market segment in 2006 and will more than double this year. Long-form "infomercials," not the traditional 15-second commercial, are driving most of the growth which will reach $5 billion by 2012.

Are newspapers making more money from video advertising than local TV stations?

On the Internet, it's true – and will continue to be true for at least another year. In 2006, newspaper-run Web sites captured about $81 million in locally spent streaming-video advertising, while local TV broadcasters captured about $32 million. Although it is small potatoes in the $280 billion U.S. advertising industry, it spotlights a fascinating phenomenon: Print media are using the Internet as a crossover platform to tap traditional TV advertisers, just as TV stations (and others) are trying to use the Internet to tap traditional print advertisers.

Nearly all local broadcast TV Web sites now feature classified ads, and almost half of all newspaper sites offer video. This print/video crossover is also taking place on sites operated by local cable multi-system operators (MSOs), radio stations and yellow pages directories.

This trend is part of a larger change in local Web advertising – one where "old" forms such as banners and paid listings fade, and new forms such as video advertising and paid-search applications become prominent.

Online competition between newspapers and broadcast TV stations – the leaders in local advertising – will intensify this year as both sides develop Web-based video products. The clash will focus on automotive advertisers initially, though real estate, health and employment are prime targets as well. The opportunity to deliver 15-second pre-roll ads along with a tantalizing new opportunity for local advertisers - long-form "infomercials" on demand – are becoming antidotes for media companies suffering declines in their core products.

The local video advertising market is still small – just $161 million in 2006, growing to $371 million this year. It is barely five percent of all money spent on local online advertising and is less than one-half of one percent of total local advertising. But as the popularity of online video grows, so will the applications, the "avails" and the money. In five years, local online video advertising will surpass $5 billion, representing more than one-third of all local online advertising.

Where will most of that money go? Not to the purveyors of traditional "word from our sponsor" commercials, but to those who can offer long-form video information that their Web site visitors actually choose to see.

Topics Covered
Executive Summary

Chapter 1
Sizing Up the Local Video Ad Market
Figure 1.1: Video Gets Five Percent of Local Online Advertising in 2007
Figure 1.2: Video Ads, Paid Search Dominate Local Web by 2012

Chapter 2
Major Competitors: Newspapers, TV, Cable
Figure 2.1: Top 10 Video Sites by Number of Streams
Figure 2.2: Do you sell streaming video ads on your TV station's Web site?
Figure 2.3: Monthly Local Video Streams: 13x Increase for WorldNow Since 2003
Figure 2.4: Small-Market Growth Example: +44% in Monthly Streams
Figure 2.5: Medium-Market Growth Example: +27% in Streams
Figure 2.6: Large-Market Growth Example: +66% in Streams
Figure 2.7: Naples Daily News Studio 55 "Vodcast"

Chapter 3
Where the Money is: Long-Form Video
Figure 3.1: Top 20 Online Advertising Categories for "Locally Owned" Businesses
Figure 3.2: Yahoo's "You Witness News"

Appendix A
Local Online Video Ad Spending by DMA

Appendix B
WebAudit Methodology