Spending on digital media for local advertising will grow about 19 percent through 2014 and will be 25 percent of total local advertising, while money spent on traditional ads will continue to decline, according to new research from BIA/Kelsey. This “steady shift toward digital media” will see online/interactive media expenditure, at about $15 billion last year, reach nearly $37 billion four years from now, the study said.
The findings, reported in BIA/Kelsey’s “U.S. Local Media Annual Forecast,” did not surprise BIA/Kelsey President Neal Polachek, who said the recession and lingering economic doldrums have “triggered a more rapid switch to online digital stuff.” Even though companies are increasingly embracing digital media for local advertising, online/interactive was not immune to the recession’s ravages. BIA/Kelsey said there was a slowdown in the growth rate for digital, including search, display and classifieds, but it predicted that digital – now about 14 percent of total local ad spend – will encompass 25 percent by 2014.
In 2008, when about $156 billion was spent on all forms of local advertising, about $141 billion was spent on traditional media, according to the researchers. The total expenditure is expected to bottom out this year, reaching only about $129 billion (with $17.5 billion going to digital). By 2014, when the total expenditure is expected to climb back to $145 billion, only $109 billion will go to traditional forms, said the report.
“Consistent with our view of more rapid structural change, we expect further overall erosion of the local media advertising market in 2010,” said BIA/Kelsey. The company does not expect “meaningful recovery” of the local ad industry until 2012, when it forecasts an increase of 3 percent. That will be followed by increases of 3 percent in 2013 and 5 percent in 2014, according to the report.
The $145 billion figure forecast for 2014 is nearly the same figure BIA/Kelsey predicted last year for 2013. “The combination of greater structural change and the more severe downturn in 2009 has shifted the entire curve outward by an additional year,” explained the company. The researchers also predict business models will continue to shift away from CPM and subscription-based pricing and toward performance models.
Polachek said a key factor in the local ad market during the next five years will be mobile. However, he said predicting the scope of mobile’s impact is not easy. “I think one of key drivers during the next four or five years will be the phone and how the mobile piece transforms all this,” he said. “I donÃÂ¢Ã¯Â¿Â½Ã¯Â¿Â½t think any analyst out there, ourselves included, really knows what will happen.”
Because many people “are now carrying around the Internet in their pockets,” Polacheck said every message sent to a smartphone “should have local context and local dimension,” and he expects to see many new mobile ad models develop in the next few years. Meanwhile, as devices become more capable of delivering ads of any type, there will be a change in the way ad impact is measured, Polacheck predicted.
He said there will be a shift away from organizing and analyzing advertising expenditure in terms of the media used. Instead, the focus will be on formats, he suggested. “We might start to look at a format that says, `Here are all the display ads in newspapers, yellow-pages, online, phones or what have you,'” Polacheck said. “And then we will say, `Here are all the audio ads.’ The forecasters have always been looking in the media buckets, but I think the Internet is going to make us rethink how we count this stuff, and we will shift from being media-centric to becoming format-centric.”
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