Local merchants and media providers are continuing their shift to the digital space. Newly released statistics from BIA/Kelsey show that the local ad market will remain robust, particularly for digital, but the numbers have been revised down slightly. The big question for this market is how significantly it will be affected by larger players like Groupon and Google as digital becomes more important.
BIA/Kelsey analysts just revised their projections for the local ad market. In adjusting the value of the market from $135.9 billion (the number released last fall) to $132.8 billion, the company cited several factors. Continued high levels of unemployment and turmoil in the housing market are still dragging the economy down. And, even small business owners remain concerned about the economic problems of countries like Greece, Spain and Portugal. Between now and 2016, the local ad market will grow to $151.3 billion. This translates to a compound annual growth rate of 2.6%.
Traditional local media companies, which currently have $111.5 billion, or 84% of this spending, will see their revenues rise to $112.7 billion by 2016. This is a CAGR of 0.2%. The local digital ad market will rise from $21.2 billion to $38.5 billion during the same time period, a CAGR of 12.7%. At the end of 2016, the digital part of the local ad market will be 25.4%, a healthy jump from the current 16%.
Control of the local digital ad market remains very much in question. Both Google and Groupon are competing for the dollars. Groupon is now seeking to increase customer loyalty by testing its Groupon VIP program which enables members to purchase closed deals, access new deals early and use anytime-refunds. And, Google has renewed its focus on local small businesses such as dry cleaners and dog walkers, by offering free support to vendors who use the AdWords Express program. In response, local media companies will be upping their game to maintain and grow the business relationships they’ve long had with local merchants as the online express picks up speed.[Sources. Groupon Expands Test of VIP Loyalty Program. Groupon.com. 20 Mar. 2012. Web. 23 Mar. 2012; Boyd, E.B. Google Goes After Your Local Small Business. 9 Jan. 2012. Web. 22 Mar. 2012; U.S. Local Digital Ad Revenue. Biakelsey.com. 20 Mar. 2012. Web. 23 Mar. 2012]