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Borrell: After Two Years Of No Growth, Local Ad Spend Will Spike In 2012

The local online ad marketplace has experienced two years of fairly flat revenues, but Borrell Associates says that the space is on the verge of a major rebound. The local researcher says that local digital advertising will rise 18 percent in 2012 to $18.5 billion, surpassing the traditional leader in the local ad spending, newspapers. Over the longer view, mobile advertising (including tablets) will push digital advertising to over $26 billion by 2016, the company predicts.

In addition to the resurrection of the local online ad space in general, which has suffered greatly from the weak economy and the inability to fully coax small business into increasing their digital marketing budgets, traditional local media players will also experience a reawakening.

Local TV broadcasters, newspapers and radio stations already command 92 percent of all local ad spending – including half of all local dollars spent online advertising. Aside from the economy, one of the main things that have been holding back small business from loosing the purse strings for greater online ad spend has been traditional companies’ reliance on “upselling” their print or broadcast ads to their respective website appendages. For the most part, when marketers are upsold, they tend to divide their existing budget between online and traditional media, diluting chances for growth on both ends.

But as the traditional broadcast and print businesses’ declines took a more precipitous turn during the recession and the anemic aftermath we’re currently in, digital ad sales had either been holding steady or emerged as significant areas of growth. That has spurred media companies to finally develop dedicated online ad sales forces. As those online sellers have settled in, budgets are expected to rise for local online as a result.

And that, Borrell says, will allow traditional media companies to turn the tables as they begin to take ad spending share away from internet pureplay companies. Next year, as local online’s surge starts happening, pureplay companies will lose 1.6 points of share while local TV stations gain 1.6 points. Radio will gain 1 point and newspapers 0.8 of a point.

Borrell also sees some changes in the mix of formats being favored by local advertisers.

Run-of-site banner sales, sold on the basis of attracting the most “eyeballs,” are forecast to drop 3 percent next year while sales of targeted banner ads more than doubles. Increases are also forecast for paid search (up 10 percent), streaming video (up 18 percent), email (up 9 percent — a surprise, considering it appears to be declining nationally, according to others’ forecast) and streaming audio (up 129 percent, thanks to the emergence of Spotify and more aggressive salesmanship on the part of companies like internet radio provider Pandora). More details on the Borrell report here.