Local Advertisers Are Glimmer of Hope for Web Ad Industry in Downturn

  |  October 29, 2008   |  Comments

As analyst firms lower their predictions for Web ad revenues this year, local online ad spending might come in higher than originally anticipated by year's end.

Online ad spending growth forecasts are about as gloomy as a damp October day, but local advertisers could help part the clouds to let in some rays. As analyst firms lower their predictions for Web ad revenues this year in the face of the financial market fiasco, local online ad spending might come in higher than originally anticipated by year's end.

Spending on local search, Web sites, e-mail, and video ads will lead the way. And, as predictions for display ads are dire, signs indicate local display advertising -- though slowing -- has some future ahead of it.

Local media research firm Borrell Associates has actually bolstered its outlook for 2008 local ad revenues, raising its forecast 2.5 percent, from around $12 million to $12.3 million. The firm also sees local Web ad dollars taking up a larger share of the interactive ad spending pie next year, when local online ad revenues are expected to increase 11 percent over 2008, to around $13.6 million.

Meanwhile, national interactive spending is set to drop by almost 10 percent, according to Borrell, which believes the credit crisis will have little impact on local advertisers.

"The interesting thing about it is a lot of the trends that we have seen coming online...are now accelerated," said Borrell's VP of Research Kip Cassino, alluding to the economic downturn. "This has accelerated the trend toward online advertising versus offline advertising. It has also accelerated the trend away from the oldest line digital advertising towards digital advertising that is more easily controllable and more easily measurable."

There seems to be a consensus that the efficiencies enabled by online advertising will influence local advertisers to either continue spending online or finally give it a try.

"In our part of the world, online is very well positioned to be more efficient to show analytics and to take a larger piece of the action," said Peter Krasilovsky, program director of marketplaces at local research firm, Kelsey Group.

His ad budget on the whole is smaller as a result of the economic decline, but Ben Boles, director of digital media for Damson Automotive Group, seems relatively bullish on using Web advertising to attract new and used car buyers to the Alabama-based auto dealer group. "As we move forward, our online dollars are not being scaled back," he told ClickZ News, noting the benefits the medium's efficiencies and analytics capabilities.

"Now, rather than necessarily innovating in what we're doing, we are just simply looking for efficiencies that online affords," he continued. "We're doing it as function of survival."

Local search advertising, a highly-measurable and targeted format, is one thing that's poised to grow in interactive ad market share, as share of search ad spending by national advertisers declines. Borrell expects local paid search advertising to grow almost 22 percent next year; meanwhile, the company predicts national paid search will lose share, dropping from $12.4 million this year to $9.3 million next year.

Advertisers are gravitating more toward local search offerings such as Angie's List and online yellow pages sites, said Cassino. Local advertisers may also begin using more search services, too. "They want to make what they're doing work better," Cassino explained. While online yellow pages firms and others offering SEM and SEO services to local advertisers probably will benefit, the big search companies may not.

"[IYPs] have the tools to sell these products; they have a large local sales force," he said. "Google is not going to do as well with this because they don't have a local sales force."

SEM and SEO spending by local advertisers could be bolstered by their need to push traffic to refurbished Web sites. "Now [small businesses] will actually take time to do some marketing," said Krasilovsky. "You're likely to see some very revved up Web sites."

Cassino agreed: "Their online marketing will collapse more and more to something that is centric to their Web site," which could result in more spending on search ads and services. "They will hope that with sufficient management of their keywords and other things they can do...that they can bring people to their sites."

Damson Automotive Group's Boles, for instance, is developing sites dedicated to particular vehicle makes and models. However, rather than using paid search ads to drive users to the sites, he'll focus on SEO. "We think it's more of a blue collar approach," he said, noting it takes virtual elbow grease to achieve high search engine rankings through site optimization.

His firm is buying advertising on the Web though. "We're concentrating heavily on local media Web sites where [potential customers are] getting news," he said. "We're also looking into significant increases in spending in social networks as well." The company uses display ads "with a very specific call to action" in Facebook and MySpace to target niche audiences.

Although Boles is confident in the power of targeted display advertising, Cassino and others have low expectations for publishers that rely too heavily on image ads as their main ad offering. "The impact on digital is going to be that the sites equipped to offer more than just online display are going to win," he said, adding, "You can already see this happening with the newspaper sites."

E-mail marketing services and video are also showing promise when it comes to the local ad market. Spending on e-mail by local advertisers is expected to grow almost 12 percent in 2009 compared to '08, according to Borrell. The company also sees local video ad revenues growing around 42 percent in that time.

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ABOUT THE AUTHOR

Kate Kaye

Kate Kaye was Managing Editor at ClickZ News until October 2012. As a daily reporter and editor for the original news source, she covered beats including digital political campaigns and government regulation of the online ad industry. Kate is the author of Campaign '08: A Turning Point for Digital Media, the only book focused on the paid digital media efforts of the 2008 presidential campaigns. Kate created ClickZ's Politics & Advocacy section, and is the primary contributor to the one-of-a-kind section. She began reporting on the interactive ad industry in 1999 and has spoken at several events and in interviews for television, radio, print, and digital media outlets. You can follow Kate on Twitter at @LowbrowKate.

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