New media
Local search is set to explode--or not
By Heidi Dawley
Mar 6, 2007, 01:05

Search advertising is the great driving engine of online advertising, now accounting for some 40 percent of total spending. Yet it's lagged at the local level. Local advertisers have been slower to adopt the internet, and that's been especially so for search.

That's now changing, but just how quickly has forecasters divided. In a new report, Jupiter Research is predicting comparatively moderate growth for local search over the next several years, to $2.1 billion in 2011 from $935 million in 2006.

But Borrell Associates, consultants in local media, believes local search is already picking up the pace, and will speed up even more, actually quadrupling over a similar period. It's forecasting growth to $4.1 billion in 2010 from $1 billion in 2006.

The difference is just how quickly small business are adopting search, with Borrell believing they're further along on the learning curve than Jupiter.

As it stands now, overall local internet spending is behind in growth, accounting for around 25 percent versus 75 percent for national advertisers, according to Borrell, whereas in traditional media the breakdown is closer to 50-50.

That local would lag national internet spending is not all that surprising. Generally, national advertisers are faster to adopt new media, spending ahead of their competitors where they can. Local advertisers don't commit until they're sure they'll see fairly quick and sure returns.

But all that said, local internet spending has been picking up, and search is beginning to see more and more of those dollars.

Jupiter’s forecast pegs local search advertising growth at about 17 percent a year over the forecast period, pushing the category from 22 percent of local online advertising in 2005 to 26 percent in 2011.

But search will continue to lag behind classifieds. Jupiter is forecasting that local classifieds will grow from $3.0 billion in 2006 to $4.9 billion in 2011, while display will grow from $400 million to $1.0 billion

Jupiter believes big national marketers will remain the largest spenders in local search. “Local marketers are not yet completely convinced about local search,” says Sapna Satagopan, associate analyst at Jupiter Research.

In part this is because local advertisers are used to yellow pages advertising, which requires little work on their part. “With local search, the perception of higher effort acts as a barrier,” says Satagopan. But also holding back local search, she says, is that search providers have been slow to sell local advertisers on the medium, though that's beginning to change.

Borrell paints a far more robust picture of local search. “Now smaller companies are getting up to speed. The most rapid growth for search is in the small, local advertising arena,” says Colby Atwood, president of Borrell.

Borrell divides local search marketing into companies that have a local presence but are not locally owned versus locally owned companies. In 2006, some 44 percent of local paid search advertising dollars came from companies with a local presence but not locally owned, while 56 percent came from locally owned companies. 

In general, Borrell forecasts that local search will grow from 24 percent of local online advertising spending in 2007 to 44 percent of the local online advertising category in 2010.

Borrell breaks local online advertising into a banner and listings category, which will still be a nose ahead in 2010 with 49 percent, local paid search, which will be at 44 percent, and email, which is forecast to hit 7 percent.

Meanwhile, in online ratings for the week ended Feb. 25, the top five parent companies were Microsoft, Google, Yahoo, Time Warner and News Corp. Online for the fourth straight week. The top five brands were also the same for the second straight week, Google, Yahoo, MSN/Windows Live, AOL Media Network and Microsoft.

Experian Group Limited was the top advertiser with 8.18 million impressions generated, more than double No. 2 NexTag at 3.93 million. With 19.15 million ads served, Yahoo was again the top advertising site, nearly tripling No. 2 MySpace at 6.61 million.

Sessions per person per week were down one from last week to 16, with domains visited per person even at 39. Average PC time per person per week was down nearly 3 percent to 16 hours and 54 minutes.