BIA/Kelsey Forecasts Online Media Growth, Albeit Slower

PhoneSearchBy 2016 local online, interactive and digital advertising revenue will reach $38.1 billion, according to BIA/Kelsey's Annual U.S. Local Media Forecast, 2011-2016 report released Monday.

The analyst firm expects 12.4% compound annual growth rate (CAGR) between 2011 and 2016, compared with 0.4% CAGR for traditional advertising revenue. The report analyzes market segmentations such as ad revenues for search, display, and SMS.

The sluggish 2012 U.S. economy led BIA/Kelsey to lower projections. Initially, the analyst firm estimated the local media market to total $136.2 billion in 2012, but now expects it to deliver $134.6 billion.

Even with an increase in significant political advertising spend this year, BIA/Kelsey estimates a little more than a 1.5% increase from $132.7 billion in 2011. The firm expects the economy to improve somewhat in 2013, but that lack of political advertising will lead to lower growth estimates in 2013 of slightly more than 0.7%.

U.S. mobile ad spend will reach $9.92 billion in 2016 -- up from $1.62 billion in 2011, according to the report. Local mobile advertising, a subset, will reach $5.8 billion in 2016 -- up from $664 million in 2011, representing a 54.2% CAGR. The local mobile market represents a 0.6% share of local media ad revenue in 2011, growing to a 3.1% share in 2016. It points to smartphone penetration, mobile Web use and increases in ad inventory as growth drivers.

The report suggests that while mobile ad inventory outpaces advertising demand today, analysts believe it will begin to accelerate increasing overall ad spend and ad rates, such as CPMs and cost per clicks (CPCs). Today, they are lower than desktop ads as a result of an abundance of inventory.

The analyst firm also forecasts that new forms of mobile and social advertising will drive demand, pointing to mobile advertising from Facebook, such as sponsored stories, ZIP code level targeting, and offers-based campaigns. And self-service tools will spur adoption. Google has begun to bundle mobile ad placement with AdWords search marketing, for example.

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