BIA/Kelsey: Local Online Ad Growth Expected To Be Slow, But Steady

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For the past several months, analysts have been predicting the local online advertising is likely to remain hot. As new numbers from BIA/Kelsey show, local online media is gaining not so much because it can tap smaller marketers that have tended to be overlooked by major media, it’s because traditional outlets are losing ground in general. The researcher is forecasting that local online media will grow from $15.2 billion to $36.7 billion, for a compound annual growth rate of 19.3 percent over the next four years.

In terms of total spending, online only had a 5.4 percent slice of the local ad revenue pie in 2009. Mobile had just 0.1 percent. By contrast, newspapers had 21.5 percent, the second largest category after direct mail had 28.9 percent share of total local ad expenditures.

While it’s clear that online and mobile have a great deal of room to grow, there is some pessimism about how fast and far the local web’s gains can go. As local researcher Borrell Associates forecast last fall, the growth rates for online ad revenues were expected to top out at a gain of 12 percent. In 2010, Borrell projects growth of just 5 percent.

Overall, BIA/Kelsey says that the U.S. local ad market should hit $144.9 billion by 2014, for a modest 2.2 percent starting from last year. Looking at ad spending from the local perspective, a meaningful recovery should take hold by 2012 after continued slowness this year and the next.

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As the more cost effective local online advertising increases its *percent* share of local media buy, do you think that the *dollar* amount spent on local media will also increase?

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