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Outlook for 2007: Pac-Man Pace for Local Online Advertising
Borrell Associates Inc., Sep 2006
Online advertising is projected to grow by 31 percent next year. This report by Borrell Associates includes analysis of the two fastest-growing segments: local paid search advertising and e-mail advertising. Paid search, already a $938 million category locally, will swell to $1.8 billion in 2007. E-mail is just popping up on the radar screen at $150 million this year, growing to $233 million in 2007.
Local online advertising faces another banner year in 2007 as local businesses continue to seek new, more efficient ways to drive traffic to their Web sites and, ultimately, to their businesses. According to this report by Borrell Associates it will grow to a $7.7 billion category in 2007, reflecting 31.6 percent growth over 2006.
The online advertising stampede in local markets has Web site operators scrambling to add hunters. About half of the local Web sites were adding to their sales forces this year already, increasing the small but growing army of online-only sales people by about 37 percent. Some of the largest local Web sites now have three to four dozen salespeople dedicated to online sales.
Of course, recent growth rates can’t continue forever. Borrell Associates are projecting a slowdown in the growth of standard online ads by 2008, a further slowdown in 2009, and a flattening or perhaps even a mild decline in local online advertising by 2010 as online promotions begin to attract more ad dollars away from traditional advertising.
In the near term, online ad spending will continue to migrate toward more targeted forms of online advertising such as e-mail and paid search. Borrell Associates also expect to see local video advertising become a trackable category in 2007.
The biggest online ad opportunities currently revolve around real estate and automotive. Combined, these two categories comprise slightly more than one-third of all local online advertising.
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