Another Negative Local Media Forecast

BIA/Kelsey released a new comprehensive local advertising forecast, seeking to compete with the VSS’s and other financial forecasters of the world. Here are the high-level bits from the release:

BIA/Kelsey forecasts U.S. local advertising revenues to decline from $155.3 billion in 2008 to $144.4 billion in 2013, representing a negative 1.4 percent compound annual growth rate (CAGR).

Only the local interactive segment will show growth throughout the forecast period. All other local media will experience marginal to rapid declines in the next 18 to 36 months. A small number of traditional media will rebound with a revived economy beginning in 2011, though most traditional media will continue to decline, albeit at a slower pace.

BIA and The Kelsey Group project the interactive share of local ad spending will more than double from 9 percent in 2008 to 22.2 percent in 2013. According to the forecast, the interactive segment (encompassing mobile, Internet Yellow Pages, local search, online verticals and classifieds, voice search, e-mail marketing and other interactive revenues generated by traditional media players) will grow from $14 billion in 2008 to $32.1 billion in 2013 (at a CAGR of 18%), while the traditional segment (encompassing newspapers, direct mail, television, radio, print Yellow Pages, out of home (non-digital), cable television and magazines) will decrease from $141.3 billion in 2008 to $112.4 billion in 2013 (CAGR of -4.5%).

A few observations:

  • It would appear that BIA (Kelsey’s buyer) has begun the process of seeking to assert its brand over Kelsey in the interactive space. The problem is that BIA currently has no credibility in the online segment and will need to maintain the Kelsey brand for awhile accordingly. 
  • Forecasts are publicly released for multiple reasons, chief among which is publicity for the firm involved. That makes it “necessary” to make some sort of big statement (either positive or negative) to get attention. Almost all forecasts released are subject to this criticism. 
  • Often people don’t spend enough time really being careful about forecasts. I’ve been sloppy about forecasts I’ve been involved with in the past myself. An example of that was the PPCall forecast that was wildly optimistic about the market and its development trajectory. We said at the time that the forecast assumed Google and Yahoo adoption of PPCall (which never happened) but I should have put even more qualifiers around it. 
  • It’s almost impossible for a forecast this broad (BIA) to be accurate for any specific segment. The best that something this comprehensive can aim for is general directional accuracy — interactive will grow by roughly X and traditional will decline by roughly Y. 
  • Directionally this is of course accurate — traditional media will continue to see declines and they can’t replace ad revenues with online growth because of different pricing and economics in the online market. 

The trouble with doing any sort of forecasting at the moment is that economy is such an independent variable — really independent. We have no idea when a recovery will occur: 2010 or 2015. 

Many of the pubs that have run with this forecast are saying things like “local markets shrinking.” That kind of thing misleads because we’re still talking about billions and billions of dollars. Even though the BIA forecast above says interactive is the only part of the forecast to grow that is buried in the stories highlighting the gloom. 

Part of the misunderstanding about “local” that still pervades the online marketing world is that people look at it as a media “silo” within a broader Internet market: verticals, IYP, what % of search? etc. Rather than a media type or collection of silos, “local” should be seen as a dynamic consumer process. Yes, there are advertisers who advertise primarily locally (e.g., SMBs, retailers). But the bigger story that I always try and emphasize is how the Internet is a research/consideration tool that influences offline purchasing. That behavior overwhelms all e-commerce; from a commercial standpoint it’s the biggest thing happening online. 

There’s also the story of how traditional media and WOM influence online activity and search in particular. The Internet is in the “middle” between the real world media and peer to peer discussions on the one side and the cash register on the other, which is also in the real world. Mobile is a compelling and evolving element in this broader process. 

So whether “local” is $141 billion or $112 billion, it doesn’t really matter — although it matters to the radio sales guy who might lose his job — it’s still a giant market. What matters is whether marketers understand how consumers use media and whether they are mapping their media spending to that consumer behavior, which involves both traditional and online (and now mobile). 

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Here’s an earlier MediaPost roundup of other negative local ad forecasts released earlier.

2 Responses to “Another Negative Local Media Forecast”

  1. Andrew Shotland Says:

    Glad I never ponied up for that PPCall forecast Greg! 🙂

  2. Virgie | targeted email lists Says:

    I hope that the Kelsey Group is correct in forecasting recovery of economy begining that early. I’ve been hearing many projections with the decline lasting through 2015.

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