• by Shankar Gupta , November 16, 2005

The annual volume of local commercial searches could surpass 20 billion queries during 2006--roughly 20 percent of total Web search, according to a new forecast by research firm The Kelsey Group. At the same time, spending on locally targeted search ads accounts for just $500 million of the $7 billion market projected by the end of 2005.

"If you consider that about 20 percent is targeted at consumers looking for local business information, the spending isn't commensurate with that consumer behavior," said Kelsey Group Analyst Greg Sterling. "There's a gap between what's being spent, according to our estimates, and what the sector might be worth."

Sterling said local search ad spending lags because advertisers haven't worked out the logistics of making efficient buys. "There's a lot of fragmentation--a lot of the local advertising is being done by small businesses," he said. "It's harder to make the buy effectively, and there are a lot more potential places to go to reach those local consumers."

Plus, Sterling said, local search tools have also not been fully developed. "I think that the local targeting tools haven't really been all that good. They're getting better, certainly, but the geo-targeting has been challenging for companies."