As local media companies build up their digital businesses, a new survey finds that the revenue from those businesses generates healthy profit margins.

The survey, conducted by Borrell Associates and the Media Financial Management Association, found that the average gross profit margin was 41.6% and the margin for earnings before interest, taxes, depreciation and amortization (EBITDA) was 32.8%. 

Broadcast media tends to have EBITDA margins in the 35% to 45% range, so digital is less profitable than its traditional business. For prime media, digital is far more profitable, according to Gordon Borrell, CEO of Borrell Associates.

In the early days of the internet, traditional media companies were concerned about trading media dollars for digital dimes. The new survey offers a look at how the gap has closed.

“There’s been a lot of skepticism about the profitability of digital operations at traditional media companies,” Gordon Borrell, CEO of Borrell Associates, said. “It’s great to see CFOs are providing insights on the digital profit factor so the industry can gauge a true bottom-line value.”

The survey also found that companies are carefully tracking the performance of their digital businesses, with 71% of the companies participating saying they have a formal framework for calculating digital profitability and 57% expressing strong confidence in the accuracy of their calculations.

“This helps pull back the curtain on digital profitability," said Joe Annotti, CEO of the Media Financial Management Association. “It shows that financial managers have their eyes on it and are in fact tracking margins for overall digital sales revenue, as well as a great number of individual digital products.” 

The survey also found that on average, companies report revenue from 11 digital products. For the survey, profit margins were calculated for seven.

The most profitable products were email newsletters, mobile advertising banners and geofenced ads.

The report notes that most of the responding companies did not include all expenses and shared resources when calculating the margins for their digital operations.

The online survey was conducted between October 24 and November 2 with 58 companies that are members of the Media Financial Management Association or clients of Borrell Associates participating. Most of the responses came from newspaper and radio companies.

Among respondents, 61% held C-suite titles, with 31% being a GM, president, VP or director.

As legislators in the House and Senate Armed Service Committees try to hammer out a final version of the National Defense Authorization Act, they are getting some advice from colleagues about using some ad dollars on local broadcast and print media.

The authorization includes the Department of Defense's almost two-thirds of the roughly $1 billion the federal government spends on advertising and marketing.

Related: Heroes Act Passes with Broadcast Aid Bucks

In a letter to committee leadership four members of Congress--a Republican and Democrat from both the House and Senate, argue that given the pandemic-related challenges for local media, the Department of Defense can boost those important businesses. "Right now, the need for reliable news and information is as important as ever," they said. "Our radio and television broadcasters and newspapers provide local and national news, emergency alerts, educational programs, and more to all corners of the United States – information that can and often does have security implications."

But they add that given the loss of ad revenue during the pandemic, the long-term viability of local journalism is at risk.

They are asking specifically that the following language in the House bill  be what is ultimately used: "It is the sense of Congress that the Chiefs of the Armed Forces, in coordination with the Recruiting Commands of the Armed Forces, should give all due consideration to the use of local broadcasting and traditional news publishers when advertising."

Let’s face it, local paid media has always been about four things in the media world: TV, radio, outdoor and newspapers. While digital has certainly breathed new life into these channels over the years, COVID-19 and its changing consumption patterns are now requiring every marketing tactic to have a local component.

As the country moves into a state-by-state reopening plan, localization for marketers – and all businesses – has become more important than ever. Brands must now think about local with the same sophistication and tools they do for large, national campaigns. 

The key to creating and delivering a recovery plan in a pandemic requires companies to be flexible, agile and act with precision.

Flexibility Key for Uncertainty

Nimble is the name of the game right now – especially for local businesses – and digital provides critical flexibility. It gives speed to market, allows shifting of targeting in real-time, turning on or off certain flights and changing of messaging as things shift. All these elements are crucial at this point in time, as we continue to operate in a constantly evolving landscape. After an optimistic May and confusing June, once again new COVID-19 cases are on the rise, with different states in various stages of open for business and the national unemployment rate soaring to +11% in June.

Brands who historically relied on national investments are now turning to local. For example, Kellogg’s recently built a local-first campaign across TV, Online Video, Social and Search in 20 priority markets as the US began to open back up. As the country grappled with different feelings and stages of reentry, it was important for creative to resonate with consumers at all points of their journey, respective to their local context and experiences. 

More marketers are similarly leaning into local as the way people interact with brands has changed and consumers are relying on digital touchpoints, to get the products, services and experiences they need. Further, they are benefitting from local digital’s ability to easily dial things up or down from there, adjusting channels and messaging as needed.

Precision Proves Essential

If digital provides flexibility, data allows for surgical deployment. Rich local data available specific to a certain market, can provide understanding of which stores are open, high-traffic areas and where people are spending their time. By looking at a cross section of important local data like supply and demand, shelter-in-place and phased reopening dates, as well as infection rates, this can help identify your best go-live date, which markets are optimal for re-entry, how your services or product offerings should or shouldn’t change, how creative assets should be updated; or where to shift or optimize investment. And that’s just a sampling.

Local data is also providing deeper understanding of new consumer behaviors and optimizing media strategy accordingly. For example, within radio, more people are working from home, waking up later and not spending as much time commuting in their car. However, leveraging local strategies, you can still reach these audiences, whether it’s through shifting broadcast local radio dollars to streaming, starting terrestrial broadcast schedules later in the morning or leveraging DJs to do live reads for flexibility of copy and greater ability to localize messaging.

By looking at various digital signals and how people have changed the way they shop and consume content, marketers are able to modernize and localize their business and the way they provide services.

Leverage Untapped and Emerging Arenas

This is also the time seek out untapped arenas to get your message across. We’re in an election year and while political ad spending has historically been tied to linear, there are many other options to consider to connect with consumers such as VOD, connected TV and gaming, which are now all offered locally, providing the flexibility, opportunity for regional relevance and precision mentioned—all within burgeoning channels. According to Syncbak, since February, there’s been a 60% increase in Connected TV (CTV) audiences and an 84% increase in VOD viewing of local broadcast content. Streaming has also become a way for people to seek out news content to feel more informed about the world around them. 

Commerce is another high-potential area with skyrocketing adoption of localized services like contactless delivery and curbside pickup. Beyond utility, this consumer trend that’s here to stay offers tremendous possibilities when paired with a localized strategy and product specificity shared in dynamic creative. For example, a client with a large product offering might choose to serve an ad for a hair styling product in a market that is in a further along phase of reopening where people are more likely to go out to restaurants and other places and serve a different product ad, such as for at-home hair dye kits, to a geography more inclined to be staying home. Out of home has also seen big shifts. Some previously premium locations like transit hubs or taxi tops in bustling city business districts, are now less attractive than high-traffic highway locations as consumer routines have changed. 

Successful brands will be the ones who move beyond thinking of local as primarily spot TV, radio, newspapers and outdoor and expand into the full arena of local digital opportunities for geo-targeted impact. The good news is that harnessing the power of local digital rarely requires a complete overhaul of your approach. It’s more likely simply optimizing core tactics, taking into account new, varied local nuances and marketplace opportunities, as well as paying attention to how things are ever-changing quickly. 

In the end, no marketer has the luxury to wait for a national recovery. Winning locally can drive much needed impact today.

Publicis Media is the media services arm of Publicis Groupe, providing digital-first, data-driven solutions for its clients.

The next COVID-19 legislative package will apparently not include a couple of things that would have helped media outlets facing plunging ad dollars and a public's increased reliance on critical news and information. 

A compromise bill was struck Tuesday (April 21) on a $480 billion successor bill to help small businesses.

Broadcasters and newspapers, with the help of some legislators, had pushed for the next COVID-19 aid bill to include billions of dollars in federal advertising expenditures-for PSAs or census response campaigns--to be directed specifically to local media outlets. 

Related: Local Media Outlets Seek COVID-19 Aid

They had also wanted individual stations and newspapers to get Paycheck Protection Act subsidies by being counted as individual small businesses, rather than operating units of a larger media group, like Tegna, Nexstar, Sinclair. 

But neither of those were included in a bill that emerged Tuesday (April 21), the National Association of Broadcasters confirmed, saying it was not surprised given that it was a targeted bill and suggesting it would work toward the next bill. 

“Given the need for unanimous consent, we always knew it was a long shot to think Congress would include substantive changes like the expanded SBA loan eligibility for news media outlets in the narrowly tailored funding package agreed upon today," said NAB EVP Dennis Wharton. "We thank the Members who led this charge like Sen. Maria Cantwell [D-Wash.] and are now focusing all our energy on the next, larger package, in support of both expanded SBA loan eligibility and a targeted federal advertising spend desperately needed to support newspapers and local radio and TV stations.”

Over half of the members of the House (240) have signed on to a letter to the Trump Administration asking it to direct federal government advertising dollars to local news media. 

Reps. Debbie Dingell (D-Mich.), Fred Upton (R-Mich.), Marc Veasey (D-Texas) and Bill Flores (R-Texas) had circulated the letter last week seeking their colleagues' signatures, 

The National Association of Broadcasters, News Media Alliance and others have called for the same thing.

“The COVID-19 pandemic is impacting local communities across our nation in unprecedented ways. All Americans are attempting to understand the full measure of this crisis, even as it continues to evolve on a daily basis," they wrote to the President. "As in many of our nation’s most challenging times, the public turns to free and local media for life-saving information and breaking news, because local radio, television and newspapers are still the most trusted sources in times of emergency and disaster. We urge you work with us in ensuring that local media can continue to inform communities, even as these outlets face unprecedented economic distress." 

The legislators want Trump to: 

1) "Direct your Cabinet secretaries to review any resources intended to be used for advertising campaigns and have them expedite such activities with local media outlets; 

2) "Direct federal agency advertising dollars for existing and new federal programs wherecommunity outreach is needed for spending with local media, including those serving minority and rural communities; and 

3) "Incentivize a portion of stimulus funds provided to businesses for their recovery efforts for advertising on local media."

A group of senators last week wrote to their leadership calling on them to include aid for local media and journalism in the next COVID-19 aid package 

The President could be a tough sell. He is constantly attacking the national media, so perhaps he would be amenable to bypassing national outlets for local ones. But his campaign has also filed suit against at least one TV station over carriage of a political ad critical of the President.

Ad forecaster BIA/Kelsey predicts that local media revenue will grow 1.6% to $139.3 billion by 2015, fueled by strong growth in the online/digital segment.

In its new U.S. Local Media Forecast 2015, BIA/Kelsey estimates that online/digital will account for about 25.2% of total local media revenue in 2015, rising 13.1% from $31 billion this year to $35 million in 2015. According to BIA/Kelsey, mobile local and social local categories will drive growth in the online/digital segment, with mobile up 53% to $6.6 billion from $4.3 billion in 2014; local social media revenue up 44% to $3.6 billion from $2.5 billion in 2014; and local search revenue up 1.4% to $7.2 billion in 2015;. Rounding out the sector, local display revenues will grow from $4.3 billion in 2014 to $4.9 billion in 2015; and local online video revenues will grow from $2.3 billion in 2014 to $3.0 billion in 2015.

"We expect the pace of growth in the overall local advertising marketplace to moderate through 2019, resulting in a three percent compound annual growth rate," said Mark Fratrik, chief economist, BIA/Kelsey in a statement. "Growth in online/digital advertising revenues will remain strong, with a 12.2 percent CAGR through 2019, compared with essentially flat revenues for traditional advertising (-0.5 percent CAGR) during the same period."