Jupiter Forecast: Local $ Grows, But Disappoints

Local advertisers have discovered the Internet and will boost their advertising 26 percent to reach $3.2 billion this year. But after that, they’ll grow just 11 percent per year through 2010, reaching $5.3 billion, according to a new Jupiter Research report, “US Local Online Advertising Forecast, 2005 to 2010.”

According to Jupiter’s analysts, local advertising will fall short in its transition to the Net, as most local businesses will be slow to jump online. Instead, local online advertising will remain centered on national firms targeting on a localized basis.

Why? The portals won’t invest in local sales forces, and existing local advertisers see better leads coming from word of mouth, magazines, trade shows and other offline marketing tactics. “They are just beginning to build databases of email addresses,” notes Jupiter.

Paid search won’t emerge as the holy grail for local, either. Jupiter notes that
paid search really caters to firms that primarily do business online. Pay Per Call, however, is “a wild card.” It has attractive ROI elements that should appeal to local advertisers. But if it does take off, it will take several years to do so.

Jupiter adds that it expects display advertising, including rich media, to emerge as a relative bright spot for local online advertising. Display is just five percent of local online dollars today, but should rise to 11 percent in 2010, presumably emboldened by a switch to video for local real estate and auto advertisers.

Jupiter’s report is a real good one and I agree with most of its premises. But in my view, it probably undercounts the impact of affiliate sales by sales forces; the likely rise of self posting; synergistic online-offline buys, perhaps by an acquisition-minded Google, and newly aggressive online entrants like eBay that effectively marry local transactions and advertising. (yeah, I’m bullish today).

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