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‘Local And Relatively Large’ Businesses Emerge As Major Digital Ad Spenders

BIA/Kelsey says that “non-SMBs” are helping drive the accelerated growth of local ad dollars.

BIA/Kelsey's Mark Fratrik
BIA/Kelsey’s Mark Fratrik

Local advertising is no longer the province of small-to-medium-sized businesses (SMBs) or, for that matter, large enterprises with franchises spread out across the country, according to a report being issued today by consultancy BIA/Kelsey.

For lack of a better term, BIA/Kelsey says that “non-SMB local businesses” — commercial entities that are concentrated in a small geographic area, but have more than the 50- to 250 employees that typically classifies a company as an SMB — are having a greater influence in how much advertising is being spent locally.

The advent of what Mark Fratrik, chief economist at BIA/Kelsey, calls “local and relatively large” businesses on the local ad landscape is part of what the analyst says is a wider shift in the flow of national and regional ad dollars.

“I can characterize it as the car company that has two- or three outlets,” Fratrik says. “In many major markets you can find a lot of them, while in some small markets, you may not find any of them. These ‘local non-SMBs’ don’t fit into any neat categories. But they’re nevertheless having an impact.”

A Bigger Way Of Thinking About Local

The nebulous quality of these “local non-SMBs” reflects the changing ways large companies spend their ad dollars. The arrival of these ad spenders on the local scene is a recognition of the decentralization of ad budgets by large, national enterprises. And it’s being manifested in the greater autonomy for local franchises and regional groups.

In an example Fratrik offers, an auto dealers association would likely qualify as a “local and relatively large” business. While the marketing budget comes from the national manufacturer, the actual spending decisions are made at the local level.

“In a big market, an auto dealership association might encompass 2,000, even 3,000 employees,” Fratrik says. “But they’re still very much a local business and the advertising is all locally planned, bought, and spent. However, you can’t compare them to an SMB, which may have less than 250 employees. And you can’t compare them to an enterprise, because one, that’s primarily where they’re getting their money; and two, an enterprise can have tens of thousands of employees. It requires a different way of thinking about local advertising.”

Spending Race Tightens

Although Fratrik is quick to say that this new category is just starting to make its presence felt, when it comes to local ad spending, the money is still coming mostly from the SMBs. But the shifts are perceptible and are likely to become more prominent over time. Here’s the breakdown from the local ad spending forecast:

For the most part, BIA/Kelsey estimates that spending on local media by SMBs will reach $50.4 billion in 2015, representing 35.8 percent of total local ad expenditures. SMBs will budget about $37.7 billion of their local media spend to traditional media and $12.4 billion to digital.

SMB spending on local media is on par with that of national brands, which will spend $50.5 billion on local media in 2015, representing 35.9 percent of total local media spending. As Fratrik notes, the spending race is tightening between SMBs and national enterprises.

An additional $39.8 billion in local media spending will come from local brands that are not SMBs. These “local and relatively large” marketers are expected to increase their local media spend by “double-digit percentages” through 2015.

Location-Based Ad Spend May Get ‘Aggressive’

BIA/Kelsey didn’t have much to say about the way mobile advertising in general — and location-based ad spending in particular — are also changing the way media is bought, sold, and targeted. The consultancy will update its earlier forecast later this month, Fratrik says, adding that the impact of geo-marketing will be among the key findings.

This past spring, BIA/Kelsey noted that “more than half of mobile ad dollars will be location-based.” At the moment, location-based ads make up 40 percent of the $11 billion to be spent on mobile ads in the US this year. By the end of 2018, geo-focused advertising will account for 52 percent of the projected $30.2 billion mobile ad market, the analyst has said.

“I suspect that will be even more aggressive when we come out with our new estimate in the next few weeks,” Fratrik says.

About The Author
David Kaplan David Kaplan @davidakaplan

A New York City-based journalist for over 20 years, David Kaplan is managing editor of GeoMarketing.com. A former editor and reporter at AdExchanger, paidContent, Adweek and MediaPost.