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Local Online Advertising is Enjoying a Bonanza Year, With Many Site Operators Reporting Revenue Increases of 50 Percent or More

Posted on: Thursday, 22 September 2005, 09:00 CDT

Research and Markets (http://www.researchandmarkets.com/reports/c24663) has announced the addition of 2006 Outlook: Local Online Growth Continues (for Some) - Online Spending Projections for 211 Cities, including Local Paid Search to their offering.

Local online advertising is exploding in 2005. Some site operators are reporting 50 and even 100 percent increases in ad revenue over 2004. What will 2006 bring?

This report analyzes the local trends in 2005 and, with the help of a panel of nearly 400 advertising experts, projects online ad spending through 2010. A useful appendix lists projections for local online advertising, including breakouts for paid search, for 211 individual markets.

Local online advertising is enjoying a bonanza year, with many site operators reporting revenue increases of 50 percent or more. While newspapers and the so-called pure-play Internet companies continue to benefit, the heightened sales activity has also breathed life into a bevy of competitors, including independently owned city.com sites and Web operations run by local TV and radio stations. In any one market, dozens of companies - some of them not even based in the market - are rushing in to compete for local online ad dollars.

The prize is a slice of the $4.1 billion that local businesses will spend this year for online advertising - 51.5 percent more than they spent last year. And it may be just the beginning: Even at $4.1 billion, local online represents just 3.1 percent of the nearly $130 billion that local businesses will spend on all media advertising this year. Projections over the next five years show local online swelling to $8.6 billion - but still less than 6 percent of local ad spending.

Next year is likely to see continued growth, though not quite as strong as in 2005. Across all 211 DMAs, local online advertising may hit $5.7 billion in 2006, a 39.3 percent increase. Not all markets will fare that well: a dozen small markets are expected to see declines, while many of the larger markets will see above-average growth.

Site operators should not become enamored of all this growth. Although traditional media companies have built impressive local Web operations over the past decade, the foundation of their revenues is cause for concern. The practice of up-selling print or broadcast advertisers - especially with an "assumed" or forced online ad that is packaged with a newspaper ad or TV commercial - could collapse under the competitive pressure of more measurable and effective forms of online advertising.

Looking ahead, the biggest growth category in online advertising is the one that most local site operators cannot even offer: Local paid search. Spending by local businesses on paid search is expected to rise 161 percent next year, to $906 million, and to account for nearly half of all local online advertising by 2010.

For more information visit http://www.researchandmarkets.com/reports/c24663

Source: Business Wire

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