Local: How Much and When?

Donna Bogatin at ZDNet had a widely cited post coming off the recent Kelsey conference that put a $31 billion figure on the local search market. What is that number?

It’s the approximately $18 billion in current print newspaper classified advertising and approximately $15 billion in US yellow pages advertising.

But here’s a much bigger local number:

Coen Numbers

Source: Robert Coen, Universal McCann (June, 2006)

Here are the competing local forecasts:

  • Borrell Associates: By 2010 local search + geotargeted display advertising = $8.61 billion (from $4.8 billion in 2005)
  • Kelsey Group: By 2010 local search (Search, IYP, Mobile) + online classifieds = $9.9 billion (from $3.3 billion in 2005)
  • Jupiter: By 2010 local online advertising = $5.3 billion (70% attributable to classifieds; from $3.2 billion in 2005)
  • eMarketer: By 2008 local = $2.8 billion

Here’s an interesting NY Times article (reg req’d) comparing the US and UK online advertising markets (with lots of discussion about local.) And here’s a piece from Friday’s MediaPost, which says SMEs are ready to increase their online marketing spend next year, based on a Yankee Group survey.

Stop. Take a breath. The $31 billion (or even 50% of it) is unlikely to migrate online at the expense of traditional media in the next decade. Local online will be worth many billions (it already is in a broader construction of the category). But it’s very challenging for all the reasons discussed at length on this blog in the past. Just think about how difficult it is to get someone’s attention at all these days — let alone a harried small business owner who has better things to worry about than SEO and SEM.

People forget that local search is a multi-headed beast. There are both large and small advertisers that target locally. Agencies and their brand clients are already tapping into geotargeted search and display advertising, with demographically and geographically targeted video to come. The big, national advertisers who target consumers in particular local markets are not part of the drama here. They see and understand the value of these targeting platforms and they can adopt them more readily.

The drama really surrounds SMEs — the 10 or 17 or 22 million — and how much of their spend will migrate online. That’s about simplicity, the infrastructure and the sales channel. The models and infrastructure now exist to bring a substantial number of SMEs into paid search and other forms of online marketing over time. It’s a question of execution and overcoming the ambivalence of doing so among traditional media, which have the most hooks into the local market.


4 Responses to “Local: How Much and When?”

  1. Local Search Will Be Huge | BPWrap Says:

    […] Donna Bogatin has put a $31 billion value on local search and online classified advertising in the US. Greg Sterling has a thoughtful review of some expert opinions and is less bullish, although the figures are still very high. However he feels that it all turns on the 20 million or so SMEs (small and mid-sized enterprises) and whether their promotional spend will migrate online. Although the infrastructure now exists to bring a substantial number of SMEs into paid search and other forms of online marketing over time, he feels this is being hampered by the ambivalence of the traditional media, which have the most hooks into the local market. […]

  2. Yair Zehavi Says:

    I believe Greg’s opinion to be very accurate: “The drama really surrounds SMEs” – SME are a major player in the local market.
    As I see it, the majority of the effective online advertising offerings are not sufficiently appealing for SMEs to be considered as an an option. It is true SEM/SEO tools are becoming more user friendly and attracting audience, yet, with most of the existing tools, the chances of the average standalone small business conducting SEM or banner “battle” with an experienced SEM/online advertising agency representing a national company are not something I’ll bet on. Such “battles” are attention consuming and require time, funds and expertise that if the SME would have them, well, they would become SEM SME…

    My guess (for what its worth) is that SMEs local advertising dollars are yet far from being well addressed by the exiting online advertising offerings. There is a consensus that the amount of money SME can put into local advertising is big – regardless of the number you wish to refer to, I suspect that the numbers shown above do not fully cover all the SME expenses on local advertising (does it include the SME spending on: handout brochures and paying the ticket they get for doing so, roadside signs and the taxes for it, and some other types “underground” traditional local advertising you ran into every day?)

    Many researches were recently published on consumer trends that show growing numbers of consumers going online before making the purchase (on and offline).
    In order to survive, SME advertising must go online sooner or later.
    My feeling is that in order to gain a “fighting chance” and survive in the extremely competitive online advertising environment, SME must utilize their competitive edge: local-presence, satisfied customers, and flexible time-table. Yet, they need simplicity… a simple online advertising tool that will actually provide then with a real “fighting” chance to get them into the game
    (and yes, disclosure: my company just soft-launched such a tool).

  3. earlpearl Says:

    Well said, especially with the last portion of your piece. As a commercial retail real estate agent I sold into the SME industry and it was difficult to grab their time and attention (as it was for all other vendors)- as an SME operator it is difficult to grab my attention, and as someone who has optimized my site to grab a lot of action–I have little time or use to pay for the various marketing tools today.

    The long hard battle will be to fight to enter and penetrate the small business market. It will be a long battle.


  4. Local Numbers: Setting the Record Straighter « Screenwerk Says:

    […] the local advertising market is worth considerably more than that “all in.” Universal McCann’s Robert Coen has estimated that local TV + […]

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