Measurements Differ, But Online Ad Spend Up

Despite a lack of measurement standards, local online ad spending will show double-digit growth over the next few years, and will continue to increase its share of total local ad spending, according to a new report from eMarketer.

As consumers turn to local search, mobile devices, hyper-local sites and daily deals to satisfy their need for highly relevant news and information, local online ad spending will rise up to meet them, insists eMarketer analyst and report author Lauren Fisher.

“Local online ad spending is growing as fast as -- if not faster than -- total online ad spending,” according to Fisher. “National advertisers shifting dollars to follow the U.S. population online will largely fuel this growth.”

As of May, 90% of U.S. agencies surveyed by local forum site Topix said their clients had asked for geographically targeted ads. Although the agency sample was small, it included large firms that represent a greater number of national advertisers.

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For eMarketer, any company using digital ads to reach an audience in a specific area is engaging in local online advertising. Most research firms agree on this general definition, but they largely disagree on how to apply it across advertiser type, ad format and online property. The result: conflicting local ad-spending estimates. 

Yet estimates for 2011 U.S. local online ad spending range from $23.3 billion (BIA/Kelsey) to $4.3 billion (the MagnaGlobal unit of Mediabrands).

BIA/Kelsey, for example, defines local online advertising as “any form of advertising that targets a specific, localized audience or location.” This includes search and display ad spend from all advertisers, including small and medium-sized businesses and national brands spending locally.

MagnaGlobal, however, takes a more narrow approach to classifying local online ad spending -- including only dollars spent on local TV, newspaper and radio sites in its estimates. Local paid search and display ad dollars spent elsewhere are not included.

Also of note, Borrell Associates’ approach is more similar to BIA/Kelsey’s in that it includes local ad spending across pure-play sites, TV, radio, cable, newspaper, magazines and Internet Yellow Pages.

Pure-play sites include any native Web property, such as a search engine, online-only directory (e.g., AutoTrader.com), review and daily deals sites. But unlike BIA/Kelsey, Borrell’s estimates do not include national ad dollars spent on local online ad placements. 

“With definitions and methodologies so distinct, a true estimate of local online ad spending remains elusive,” Fisher admits. “For now, similarities in projected local online ad-spending growth and consumer interests remain the best indicators of current and future advertiser investment.” 

Although U.S. local online ad spending estimates vary greatly, similarities exist that highlight advertiser investment.

All research firms believe online will continue to increase its share of total U.S. local ad spending over the next few years, adds Fisher.

Borrell Associates and BIA/Kelsey predict online will account for 19% to 20% of total local ad spending by 2012. MagnaGlobal’s estimate, on the other hand, is much lower -- at 7.4% -- because it only includes a small portion of local online advertising spent on local TV, radio and newspaper Web sites.

All three firms foresee double-digit growth for 2011 U.S. local online ad spending. MagnaGlobal shows a slightly less optimistic growth trajectory for local TV, radio and newspaper revenues in the coming years. Borrell Associates’ inclusion of the rapidly growing daily deals category is likely one reason for its higher estimates for online ad spending gains between 2011 and 2014.

eMarketer estimates show U.S. online ad spending growth slowing somewhat in 2012 and continuing to taper off through 2015. Comparatively, BIA/Kelsey and Borrell Associates predict that growth in U.S. local online ad spending will outpace that of total online beyond 2012, evidencing a landscape in which advertisers will continue to invest at a healthy rate,

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