Online Classified, Vertical Ad Spending Boom Predicted

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Online classifieds and vertical ads in the United States will make up nearly a quarter of all Internet advertising in four years, predicts the Kelsey Group.

The Princeton, NJ-based research company anticipates online classified and vertical advertising, which combined now account for about 18 percent of online ad spend, will reach 24 percent by 2012. Meanwhile, revenues for interactive classifieds and verticals -- called "marketplaces" by Peter Krasilovsky, Kelsey Group's program director of marketplaces, will reach $14.7 billion by 2012, according to the firm.

"Verticals have typically been dominated by the big three of auto, real estate and [employment] recruitment," said Krasilovsky. "With the new capabilities of Web 2.0 features such as user-generated-content and easy, self-serve capabilities so people can set up their own ads, we see a number of additional vertical categories really ramping up their advertising in the next five-year period."

Krasilovsky said the list of growing verticals "goes 20 deep," but includes local healthcare and financial services, as well as legal services.

Kelsey Group's findings are included in its new "Global Interactive Ad Spend and Interactive Classifieds Forecast." The document predicts U.S. interactive classified advertising, now at $3.9 billion, will reach $9.1 billion by 2012 and U.S. interactive vertical advertising, now at $100 million, will reach $5.6 billion by the end of the same period.

The report predicts similar growth in most countries. By the end of 2007, interactive advertising constituted 7.4 percent of the global ad market, up from 6.1 percent at the end of 2006, according to the Kelsey Group. By 2012, the interactive share will reach 21 percent globally, said the company.

Krasilovsky said there are many small, local businesses that advertise "but a lot haven't been spending much money on Internet...because they haven't really found it easy to do and because it hasn't been specifically applied to their businesses."

As an example, he said a garden center might have used the Yellow Pages to advertise, with mixed results, but not the Internet. However, such a company would likely spend money to buy interactive ads on a Web site that focused on gardening or garden-center needs.

"That's what we are seeing," he said. "Whole new marketplace categories. Specialist categories. It's a real interesting phenomenon."