When Will Local Get Respect?

MoneyI was asked the other day on a call whether local would finally be recognized by the mainstream press and garner the attention it deserves in 2008. My response was that there’s a bit of a “boy who cried wolf” problem in that local has been hyped for so long and been disappointing in terms of revenues, despite the forecasts.

But what’s interesting is that the latest Borrell report puts current “local online advertising” (in 2007) at $8.5 billion. That number includes display (“banners”), search and video — with display comprising the lion’s share of that figure. The top industry categories/market segments that capture these ad revenues according to Borrell are (by share):

  • Pure plays (e.g., Google, Yahoo!, Local.com) — 43.7%
  • Newspaper sites — 33.4%
  • Directories — 10.1%
  • Broadcast TV — 9.3%

Let’s assume the figure of $8.5 billion in geotargeted or local online advertising is correct for 2007. Overall online ad revenues are expected to reach about $21 billion this year in the US. That would mean that local revenues (not SMB spending) amount to roughly 40% of all online ad spending — today.

This is a very substantial figure and a big story. But it’s not as big a story of course as the consumer behavior. In my reformulation of local — Internet-influenced offline transactions — the majority of online consumer behavior with any sort of commercial intent is in some way tied to local purchases.

Consider a range of recent survey data:

  • 89% of consumers making in-store purchases in key categories have conducted online research prior to purchase
  • 88% of sales revenue generated from online advertising budgets (of participating retailers) came from in-store purchases
  • 92% of Internet/search influenced consumer electronics purchases happen in local stores
  • 82% of the people using local search sites followed up with offline action

Sources: BIGResearch, Yahoo-comScore (2006-2007), TMP Directional Marketing (2007)

Local is the “last mile of search.” It’s about directing consumers to offline businesses (whether big boxes or local plumbers) and tracking the efficacy of the online spend.

One of the other problems is that local is not like the iPhone, where we can clearly measure success in terms of market share and unit sales. Local IS the Internet; it’s about how we now use the Internet in myriad ways to conduct research and communicate with one another about purchases, events and activities in the real world.


Related: Here’s eMarketer’s latest online spending breakdown and forecast:

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One Response to “When Will Local Get Respect?”

  1. Respect Local Search Says:

    […] the same time Brian wrote his article, Greg Sterling wrote an article When Will Local Get Respect? Greg goes into some of the statistics about the marketshare, etc but he has a great point to make […]

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