Borrell Associates released a bold forecast early last week at the MediaPost Search Insider Summit. Research Director Corey Elliott forecast that paid search would decline 32% in U.S. local markets by 2018. Contradicting that prediction, BIA/Kelsey Managing Director Rick Ducey stepped up to say the same market would grow at a 7.5% compounded annual growth rate, reaching $10.2 billion within four years. MediaPost took apart the numbers and definitions to analyze the local media paid-search spend. Here's what we found.
It really comes down to different methodologies, perspectives on the market, definitions and data used to forecast media consumption. While Borrell's and BIA/Kelsey's model define local as money spent in a market either by a national or a local brand to target people in a specific market, the methods and what goes into the pot to determine forecasts differ.
Borrell defines paid search as the text ads that consumers click on in search engine query results and the purchase of keywords on sites such as Google, Yahoo, Ask, MSN, and others. It also includes search advertising in directories. Outside of that definition the spend shows up in other places within categories that fall within Digital Services such as search engine optimization (SEO) and product listing ads (PLAs), which appear under shopping ads from Google and Bing containing images.
Borrell estimates spending patterns in each of the nation's more than 20 million business locations -- which differ according to their business category -- the number of employees for each, and the location. Market, regional, and national estimates are the sum of these individual estimates. The firm looks at revenue received by local media companies and the amount spent on advertising by local businesses, along with other factors.
While BIA/Kelsey defines paid search in a way that is similar to Borrell, the firm differs when it comes to analysis, methodology, and what goes into the pot to forecast budget and spend. Brands don't generally target PLAs to local markets, BIA/Kelsey, nor Borrell, include them in local paid-search estimates. BIA does include them in overall search estimates.
BIA/Kelsey's paid-search forecasts also include mobile paid-search spend for smartphones, but not tablets -- whereas Borrell breaks out smartphones into a subset of Digital Services, device agnostic, which includes smartphones and tablets. Elliott did not break out mobile paid-search spend during the Summit, but told Search Marketing Daily Monday that the analyst firm will soon release new numbers. He estimates that mobile media management as part of Web and application development in the Digital Services bucket will rise 610% by 2018.
Elliott said local paid search spend will peak in 2014, and decline 32% by 2018. SEO will continue to grow. Advertising is one piece of the puzzle, and promotions another, but brands will spend the majority of their Digital Services budget in application design, online video production and mobile media management. Today, roughly one in three dollars earmarked for digital campaigns is spent on mobile, he said, but by 2018 it should take more than 80%.
BIA/Kelsey's search forecast includes mobile and desktop and is based on history and forecasts of pricing, among other factors like Google and Bing quarterly reports, and trending data from comScore and other major firms.
BIA/Kelsey SVP and Chief Economist Mark Fratrik said the total paid-search market will reach $21.5 billion in 2013 to $29.4 billion in 2018, with a compounded annual growth rate by 6.4%, per BIA/Kelsey. The firm estimates that local search will grow from $7.1 billion in 2013 to $10.2 billion in 2018, with a CAGR of 7.5%. In 2014, local search will reach $7.4 billion.
Fratrik said BIA/Kelsey expects total mobile search estimates will grow from $3.06 billion in 2013 to $10.85 by 2018. Local estimates will growth from $1.79 billion in 2013 to $7.93 in 2018. "In 2014, we expect to see mobile local search and desktop local search to generate about the same, but we will see mobile local search grow much faster, and a much slower rate of growth for desktop local search," he said.
Muddying the waters a bit more, BIA/Kelsey plans to include tablets in mobile depending on the type of transmission such as cellular or WiFi.
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