Local is Fueling Much of the Online Ad Market Growth

If you ever wondered why so many people are trying to ‘crack the nut’ on the hyperlocal advertising industry, industry analyst Mary Meeker in her recent report reminds us of just how big the online advertising opportunity is and how fast it’s expected to grow.

According to Meeker, the online advertising industry is on a path to exceed the $50 billion mark over the next few years. Meeker, an analyst at the market research firm Morgan Stanley released her report at the Web 2.0 Summit in San Francisco. Meeker claims that Americans spend 28 percent of their time on the we, but only 13 percent of ad spending is devoted to the channel. This indicates that the market has an enormous opportunity for growth.

Mobile technologies, especially smartphones will drive advertising spend even further. “It’s the fastest-ramping technology transformation the world has ever seen,” Meeker said. “I’ve been of the view for years that the mobile Internet was the next big thing.” Meeker even expects mobile commerce to replace ecommerce as smartphone penetration continues to grow. Driving this is the fact that wireless connections and geosocial applications enable impulse purchases and allow merchants to deliver coupons and offers to users at the time when they’re most likely to spend. According to a recent report from ABI Research, by 2015 expenditures on location-based social networks such as Foursquare and Gowalla are expected to near $2 billion.

Search Engine Optimization continues to be a strong player. According to comScore, more than 16 billion searches are conducted every month by potential clients looking for products and services. This highlights the continued importance of SEO and the role it plays in the online advertising market.

It is evident however that online local advertising is fueling much of the growth in the online advertising market. In 2009 Borrell Associates projected the online local-ad market to be worth $15.5 billion by 2013. According to a new report from Borrell Associates, local online advertising is now forecasted to grow by nearly 18 percent in 2011 from $13.7 billion this year to $16.1 billion in 2011.

These numbers provide further support for local media companies to place an even more emphasis on the development of online hyperlocal strategies. One thing is for certain, with increasing opportunity competitive pressures on the local media companies turf will only increase.