Local Display Ads: Where Are They Going?

The Kelsey Group’s latest release projects an increase in geotargeted display advertising:

The geotargeted display (or banner) advertising market will grow from $897 million in 2008 to $1.9 billion in 2013, representing a compound annual growth rate of 16 percent, according to BIA/Kelsey. The geotargeted segment of the display market will grow from 10.2 percent of all display ads sold in 2008 to 15 percent by 2013.

The locally bought portion of the market, which primarily comprises small and medium-sized businesses, will see the highest growth, at a CAGR of 66 percent. The segment will grow from $45 million in 2008 to $565 million by 2013. Further, the SMB market will swell from 5 percent to 30 percent of the total geotargeted market over the same period.

Most small advertisers are not using display advertising today. Three different surveys (with different sample sizes) I’ve conducted in the past year and a half have shown between 13% and 22% of SMBs saying they have done online display advertising of some sort (definitions are an issue). That means, on average, roughly 80%+ have not done any display advertising. There’s a much longer conversation to be had about how SMBs execute display campaigns directly or via surrogates.

My belief is that national entities will still be the primary ones taking advantage of increasingly accurate display geotargeting online and on mobile devices in the foreseeable future.

The 10.2% starting point in the Kelsey forecast likely derives from a comScore study, which was based on a creative but pretty rough methodology for determining which display ads were geotargeted in four markets. It probably under-counted actual geotargeted display inventory.

The stated rationale behind geotargeted display growth in the Kelsey release — that local search resellers are looking for cheaper local impressions/clicks — is sound. But in my view it’s too narrow in terms of what may actually drive geotargeted display over the long term.

There’s also the problem of the ad creative. While that can be automated it has to be done carefully and thoughtfully or those ads simply won’t perform. Creative is the most important part of a display campaign and most of the local search resellers are not thinking about creative; rather they’re just thinking about alternative sources of cheap local inventory.

Compare Borrell’s numbers (definitions are always an issue in forecast comparisons), which have locally targeted “banners” at $5.3 billion in 2010. In addition Borrell sees standard display giving way to myriad other forms of local advertising, including video, email and search over the next few years.


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