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Local Digital Ad Revenue Gains Holding Steady Through 2015

For the second year in a row, BIA/Kelsey predicts that online ad revenues in the local space are set to rise by 13 percent.

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

There aren’t too many surprises in BIA/Kelsey’s 2015 local ad spending forecast, though the advertising insights consultancy’s projections suggest that the decade-long shift to online from traditional media is becoming more dramatic.

For the most part, the total local market’s growth appears relatively anemic, as BIA/Kelsey projects total local media expenditures to rise just 1.6 percent to $139.3 billion. In part, the downward spiral of pricier newspaper ad spending to lower-cost digital channels like social and search accounts for that meager growth.

“The overall local advertising category isn’t growing as fast as the economy, but it is growing nevertheless,” says Mark Fratrik, chief economist at BIA/Kelsey. “A large part of it is advertising, particularly from small-to-medium-sized businesses and others moving to digital and adding non-advertising marketing campaigns that don’t fit in neatly into the advertising definition, like social media.”

Local Gets Interactive

The digital segment of the local market continues to remain strong, though overall, the online local space doesn’t appear to be accelerating.

Interactive ads will account for just over one-quarter (25.2 percent) of total local media revenues in the next year, says BIA/Kelsey’s annual report, which will be released in time for the company’s three-day Leading In Local conference that kicks off today in New Orleans [Full Disclosure: GeoMarketing’s parent company, Yext, is among the event’s sponsors].

In general, digital revenues are expected to rise from $31 billion in 2014 to $35 billion in the next year, representing a 13.1 percent growth rate. That number is pretty much in line with what BIA/Kelsey called for last year. However, when its annual report was released in November 2013, the total local market was growing at a decent 2.8 percent versus the current 1.6 percent gains BIA/Kelsey is forecasting for 2015.

Aside from being less expensive, the advent of mobile and social media coming into their own as valuable advertising vehicles — and not just promotional, public relations tools that many agency executives initially perceived it as — is altering the way enterprise companies with vast coast-to-coast franchises and SMBs are planning their marketing budgets.

Tag, Marketers: You’re It

Next year, BIA/Kelsey says mobile local ad revenues will jump 53.5 percent to $6.6 billion, while local social marketing dollars will grow 44 percent to $3.6 billion.

The spending trends for social are fairly similar on a national level and are set to climb by 36.8 percent. As people increasingly use their mobile phones to manage their social media from Facebook to Twitter to LinkedIn to YouTube (for user-generated content uploads and sharing, at least), marketers are seeking to catch up to consumers’ on-the-go activity.

“Social is what’s driving a lot of the digital as well as the mobile component,” Fratrik says. “Every quarter, when Facebook announces its earnings results, many analysts get surprised by the rapid growth in the mobile part of that social network. It was just a few years ago when Facebook’s stock price was depressed because everybody wasn’t sure if Facebook could transition its success into mobile. Well, that question has been answered.”

The Geo-marketing Phenomenon

The expansion of smartphone usage and the time spent on social media has surprised many analysts with how quickly and widely consumers have gravitated towards these platforms. Adding in location data represents another way advertisers will try to reach and target consumers.

“Geo-targeting is phenomenal,” Fratrik says. “It gets very 1984 or Blade Runner when I’m walking along the streets of New York and a restaurant two blocks away is targeting me with an ad based on where my cell phone signal is pinpointing my location. While privacy will be an issue that the industry will grapple with for years, it does open up lots of possibilities for certain types of retailers.”

While plumbing services probably won’t be targeting consumers based on where they happen to be driving or walking at a given moment, restaurant chains and automotive dealers have been keenly observing the advances made by geo-data software providers.

As Mike Boland, a BIA/Kelsey senior analyst, told GeoMarketing earlier this year, location-based ads are estimated to make up 40 percent of the total $11 billion that will be spent on mobile ads in the US this year. By the end of 2018, geo-focused advertising will account for 52 percent of what is anticipated to be a $30.2 billion mobile ad market.

“The important digital marketing decisions are starting to be made more and more on the local and regional level,” Fratrik notes. “If it’s the middle of the afternoon and a restaurant manager notices the place is only a quarter full, it makes perfect sense to send an ad to smartphones in certain areas where people might be receptive to a deal. Location is going to underpin the advertising done on social and mobile as a result of the on-the-go mindset consumers are in when they’re using their phones.”

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.