Analyst firm expects growth in display and search advertising through 2012, and changes in classified advertising.
Jupiter Research predicts local online advertising will reach $8.9 billion within five years.
In a report titled "US Local Online Advertising Forecast, 2007 to 2012," analyst Barry Parr states that local display and search advertising will grow over the next five years at compound annual growth rates (CAGRs) of 18 percent and 16 percent, respectively. It attributes that growth to continued interest by newspaper and yellow pages publishers along with improved local performance by major search engines. It also states that local advertising will grow at a CAGR of 13 percent from 2007 to 2012, a faster clip than online advertising in general, which has an anticipated 12 percent CAGR.
Parr writes in the report that although the newspaper industry and local broadcasters face challenges, their more established mature readers will keep them afloat as "local media must learn to work in a world increasingly dominated by the search bar and prepare themselves for an eventual face-off with their national competitors."
Drilling down into consumers' preferred methods for accessing local business information, Jupiter found portals have maintained a strong position with younger individuals. Thirty-six percent of those aged 18 to 24 cited portals as among the top two or three "most helpful" sources. Online yellow pages and traditional yellow pages also ranked well with the younger demo, appealing to 33 percent and 30 percent respectively.
Online review sites like Yelp and others performed comparatively poorly across age groups, ranking below 5 percent in all demos with the exception of those aged 25 to 34, 8 percent of whom said they found value in them. Perhaps not surprisingly, 45- to 54-year-olds tend to favor traditional channels, with 46 percent citing newspapers and 44 percent citing print papers as "most helpful." Respondents could select up to three preferred methods for researching local business info.
The report also said classifieds will continue to be the dominant form of local advertising, but predicts that major changes will occur in real estate and employment fields due to fears of a recession and major job sites like Yahoo HotJobs and Monster building relationships with local newspapers.
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