Local Digital Advertising to Surge Through ’09

So-called “digital directional” advertising (DDA) that targets local marketplaces will grow to $10.8 billion worldwide by 2009, according to The Kelsey Group.

The Kelsey Group defines “directional media” as advertising delivered to potential buyers when they’re in the process of making a purchase decision. “Digital direction media” refers to advertising targeting these potential buyers via IYP, local search, and wireless directories.

The U.S. share of the global DDA market is expected to grow from $774 million in 2004 to $5.1 billion by 2009, roughly half the world’s total. Of the projected U.S. figure, local search will account for $3.1 billion (66 percent); spend on IYP will reach $1.3 billion (25 percent); and wireless platforms will total approximately $400 million (7.5 percent).

A key growth driver will be the number of local small-to-midsize businesses (SMBs) that increasingly invest in DDA in the coming years, said Neil Polachek, SVP at The Kelsey Group.

“We are in the midst of a fairly major sea change. Small to medium-sized companies have been online for a couple of years, but it’s just starting to have a material impact for their business,” Polachek said. “In 2004, we saw considerable product development in local search by Google and Yahoo In 2005, we expect them to reap some benefits, and we anticipate Microsoft, AOL, Ask Jeeves, FAST, and several others will have strong entries into the market.”

Currently, the U.S. lags behind Europe, accounting for approximately 27 percent of the total world DDA market in 2004. With $1.7 billion in receipts, Europe accounted for 61 percent of the global DDA market at the end of 2004.

Directional Media by Market Segment, 2004 and 2009
United States
2004, estimate (US$, millions) 2009 (US$, millions) CAGR (%) 2009 Market Share (%)
Traditional yellow pages 14,294 15,151 1.2% 75%
Digital (traditional publishers) 294 1,815 43.9% 9%
Digital (online publishers) 375 3,283 54.4% 16%
2004, estimate (US$, millions) 2009 (US$, millions) CAGR (%) 2009 Market Share (%)
Traditional yellow pages 7,296 7,850 1.5% 65%
Digital (traditional publishers) 1,432 3,123 16.9% 26%
Digital (online publishers) 243 1,045 33.8% 9%
Source: The Kelsey Group (2005)

Polachek attributes the U.S.-Europe disparity largely to the effectiveness European telecommunications providers have had in drawing substantial populations to related ISP and IYP services.

That said, The Kelsey Group projects the U.S. will overtake the European market in terms of total DDA in 2007. In 2009, Europe is projected to account for 40 percent of the world DDA market, 9 percentage points behind the U.S.

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