Online Poised for Dominance in Local Ads

Online advertising seems poised to overtake newspapers as the top spot for local advertising within the next few years, according to Borrell Associates Local Online Advertising Forecast due out today.

Online currently accounts for $15.7 billion of an $89.5 billion local advertising market — 17.5%, compared to newspaper’s 22.7% — according to Borrell. The research firm is predicting that local advertising will grow 5% in 2012 and online will rise 18% to $18.5 billion, or 19.7% of all local advertising. At that rate, online could pass newspapers by 2013 as the favored medium for local advertising.

But traditional media companies still control more than half of all local ad dollars spent online. Pureplay companies — such as Yahoo, AOL, Google and other Internet-only outlets — only pull in 46.7% of those ad dollars, a share that’s expected to decrease slightly to 45.1% in 2012.

But the biggest increase in local dollars will be seen on the mobile side. Borrell forecasted a 66% increase in local mobile advertising in 2012, reaching $4.3 billion from $2.6 billion in 2011. Local mobile advertising is expected to double its share of local advertising by the end of next year, from 6.3% to 14.1%.

Further out, Borrell expects mobile advertising to make up 88% of all local digital advertising by 2016.

As for ad formats, the decline of run of site display ads continues, with paid search becoming firmly entrenched as the dominant ad format — rising 10% in 2012 to $6.2 billion. Display’s slipped out of the top spot in 2009 and is the only format predicted to decrease in 2012 — down 3% to $5.1 billion — according to Borrell.

Targeted display, on the other hand, is expected to see a big increase in 2012, rising 105% from $1.5 billion in 2011 to $3.1 billion in 2012.

Streaming video ads are also expected to increase in 2012, rising 18% to $2.8 billion.

Surprisingly, though Borrell predicts that New York City in 2012 will become the first market to top $1 billion in local online spending, tiny Glendive, Mont. — at 210, the smallest ranked Nielsen market — is expected to see the biggest growth next year, growing 22.7% from $1.41 million to $1.73 million. Of the top 20 local online growth markets, only 7 were among the top 20 Nielsen markets.

San Angelo, Texas (DMA 197), Greenwood-Greenville, Miss. (DMA 187), and Parkersburg, W.Va. (DMA 192), also made the top 20 growth markets, expected to rise 19.3%, 19.1% and 18.8% respectively.

Eric J. Smith of NetNewsCheck