While local online ad sales this year are down from ‘08, the longer-term trend is moving up, according to BIA/Kelsey research that projects the interactive ad market will post a compound annual growth rate of about 15% by 2013. It also says online ad sales should rebound faster than its traditional media counterparts.
Ad spending on local media is expected to take a 14 percent tumble from 2008 to 2009, with a continued slide into 2010, representatives from BIA/Kelsey said Wednesday at ILM: 09.
But a partial rebound is expected over the next five years, with digital and online ad sales gaining a larger share of the ad medium breakdown.
The economy is the largest reason for the drop in ad spending, as small- to medium-size businesses spending 23.5 percent, on average, less in 2009 on local advertisements than in 2008. Even with the drop, the road ahead is looking positive for digital ad sales.
The “cliff” in the switch from traditional advertising formats to digital is already here, BIA/Kelsey CEO Neal Polachek said, with online search leading the way.
The group expects the interactive advertising market to post a compound annual growth rate of about 15 percent by 2013, with most other forms posting declines.
The firm reports that for the first time ever, more small- to medium-size businesses used digital or online media more than traditional avenues in 2009, with 77 percent saying they use some form of new media advertising, versus 69 percent using some form of traditional media.
BIA/Kelsey expects online ad sales to rebound faster than its traditional media counterparts, as younger businesses have quickly adopted the format.
According to BIA/Kelsey, small- to medium-size businesses less than three years old have an average of 30 percent of their ad budget in online ads. Companies in business for more than 11 years generally have around 13 percent of their ad budgets online.
Younger businesses are also quick to adopt social networking as a means of local advertising, with 44 percent of 0-to-3 year-old business saying they will use a page on a social site in the next year.
BIA/Kelsey forecasts that local digital and online ad sales will account for $32.1 billion out of $144.4 billion total sales in 2011, gaining $18.1 billion from 2008.
With search’s growth comes new forms of online businesses on the verge of overtaking their physical counterparts, similar to the decline of travel agencies in the mid-2000s as travel sites grew in popularity.
Polachek said BIA/Kelsey believes companies like Associated Content, Demand Media and examiner.com are taking steps toward establishing a system for scaled content creation, which could affect local newspapers.
These sites use search analytics to determine what users are interested in, and prompt their user bases to create content based on those interests.