Local online ad spending is expected to rise 28.7 percent to more than $2.6 billion – twice the growth rate of overall Internet advertising – according to the just released projections from Borrell Associates’ WebAudit.
These findings represent a dramatic change, considering it was only two years ago that the research firm reported that local advertisers were relatively uninformed about the benefits of advertising on the Web.
“The general awareness of local advertising is going up, but there is still a lag between spending and audience,” commented Colby Atwood, director of business development, Borrell Associates. “The audience is flowing onto the Web, and businesses are seeing that the Fortune 500 takes the Web seriously. Online advertising budgets are increasing, but there is still a way to go.”
Borrell doesn’t distinguish between different types of online media in its research, so it’s not clear whether the money is going to local newspapers, search engines, Internet yellow pages sites, or other categories.
New York City and Los Angeles are the only designated U.S. market areas (DMAs) that break through the $100 million ad spend threshold. Projections for New York City indicate a 34 percent increase in 2004, resulting in $184.09 million in spending, while Los Angeles’ growth projection is somewhat lower – just over 24 percent.
|Local Online Ad Spending (in millions)
2003 Actual and 2004 Projections
|New York City||$137.15||$184.09||34.2%|
|San Francisco-Oakland-San Jose||$59.71||$74.36||24.5%|
|TOTAL FOR 210 DMAs||$2,087.38||$2,687.22||28.7%|
|Source: Borrell Associates’ WebAudit|
The Albany-Schenectady-Troy DMA in New York exhibited the most phenomenal growth – 101.3 percent – from $20.22 million to $40.71 million. Borrell Associates attributes this surge to a projected influx of high-tech industries around the relocation of Semetech, a microchip and nanotechnology firm. The region has also seen job growth at triple the average U.S. rate in the Leisure and Hospitality and in the Financial Services sectors – both very strong segments for local Internet advertising.
Formidable increases were also projected in Rapid City, SD, where more than 40 percent growth is expected, resulting in $3.28 million; the Rochester-Mason City-Austin DMA (in Minn. and Iowa) should register nearly 39 percent growth to $7.52 million; and the Richmond-Petersburg (Va.) DMA is forecast to gain 38.6 percent, reaching $13.39 million.
Expected to experience the greatest decline in local ad spend was the Fort Smith-Fayetteville-Springfield-Rogers DMA in Ark., dropping nearly 10 percent from $5.69 million to $5.13 million. Borrell Associates suspects that the closing of a large Internet application service provider was largely responsible for the decrease.
Borrell Associates’ WebAudit analyzes locally spent online advertising for 210 designated U.S. market areas. Borrell defines these dollars as “checks written by locally based advertisers to Internet media companies,” excluding national advertising that is directed to the individual market.
The firm is expected to release its annual survey of more than 500 local Internet operations later this month that will reveal average budget increases of approximately 35 percent. Borrell Associates projects some newspaper and TV operations will register 80 percent to 100 percent increases in Internet revenues for 2004.
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