Dec. 9, 2007

Today Borrell Associates says that local online advertising is already worth about $8.5 billion. That number consists of local search, local banner advertising and local video.

Overall, advertising banners are the largest spending category, and video happens to be the smallest.

However, Borrell expects local search to increase substantially to become almost half of the total local online spending for 2008, which is projected to reach almost $13 billion.

Local search is expected to increase from roughly a current $2.5 billion industry to well over $5 billion next year.

Borrell expects local video to roughly triple from just over $400 million today to $1.27 million next year.

The marketing research firm says "The Big Three" classified categories (jobs, cars, real estate) will have a 37.7 percent share of all online ad spending for next year.

As a whole, 2008 will be a perplexing year for local media companies trying to tackle the Internet. Most yellow pages publishers, cable companies, newspapers, radio and TV stations are still pinning their hopes on their traditional sales reps being able sell online ad packages.

However, there is increasing evidence to support the idea that a greater investment in an independent online sales force will be necessary to continue the growth these properties have enjoyed for the past few years.

The main agents behind this relentless growth are the popularity of search engine and online directory advertising and, to a lesser extent, the growing popularity of low-cost video commercials.

For 2008, Borrell expects local search to more than double to just over $5 billion, while it thinks local online video advertising will grow to more than triple to nearly $1.3 billion.

This growing trend in which pure-play companies are getting a bigger and bigger slice of that $8.5 billion pie dosen't surprise market analysts such as Borrell and others.

Pure-plays currently hold about a 43.7 percent share, compared with the newspapers’ 33.4 percent share.

In 2004, newspapers had the largest share at 44.1 percent, while local yellow pages publishers had 18.4 percent.

According to Borrell Associates, the local business categories that have the highest online penetration rates as a percentage of total ad spend are:

Recruitment

Real estate

Computer-related services

So-called DotCom businesses

Auto marketing

Miscellaneous retail

Borrell uses a total market of 11.5 million "business locations" and says the average spending was $299 "per location" for this year.

The range is just over $18,000 at the high end to just under $100 at the low end.

Source: Search Engine Land