Online advertising will increase just 5% to $14.9 billion next year as a lagging economic recovery and a maturing Web ad market combine to further slow growth, according to a new report from Borrell
Associates.
That rate would be less than half the 12% gain (to $14.2 billion) that the local media research firm projects this year, and well below the torrid 45% annual growth of the last
five years. In addition to the impact of economic downturn, Borrell said the diminishing returns reflect a local online ad category rapidly approaching "saturation."
Borrell expects that
the 13.8% share that online makes up of all local advertising will peak at 16% by 2013. As a result, Borrell predicts that local Web advertising will post an anemic 2.9% growth rate over the next five
years.
"The game in 2010 will center more around stealing market share than growing the market. Local advertisers have had plenty of time to assess the effectiveness of banner ads, search,
streaming video and e-mail advertising peddled to them over the past decade," stated the Borrell study. "They will abandon programs that just do not work, and embrace those that produce measurable
results."
At the same time, competition will be further heightened in the contracting online market as a host of new and existing competitors jump in, offering hyperlocal services. They include
National Public Radio, which has received $3 million this month to start a hyperlocal news operation, and AOL -- which acquired community news provider Patch.com this year for $7 million, with plans
to roll it out to localities nationwide.
The meager growth there in 2010 will be driven by demand for paid search and online directory advertising, video streaming, and e-mail advertising.
Banner ad sales will fall 10%. One exception to that decline may be for companies selling display advertising via Yahoo's "APT" behavioral targeting platform.
"More than 800 newspapers are
signed up to participate in that program, and by the third quarter of 2009 some of the larger companies were reporting millions of dollars in increased sales," according to Borrell.
One
otherwise rapidly growing category in which the research firm doesn't expect to see much gain from local advertising is mobile. It estimates that local buys will account for only 15% of mobile
advertising, totaling slightly more than $500 million in 2010. Even so, Borrell advises that mobile is worth watching as mobile couponing, directory advertising and sponsored text messages gain
traction with local marketers.
The Interactive Advertising Bureau reported this week
that overall online ad spending for the first half of 2009 dropped 5.3%, and is expected to decline for the full year for the first time since 2002.
