advertising spending

The landscape for local advertising, particularly by small- to medium-sized businesses (SMB’s) is undergoing a profound shift that is being masked in part by the overall downturn in advertising spending, two recent research reports from BIA/The Kelsey Group demonstrates. The key for local media companies is to segment the SMB client base in relation to their adoption of online media. And the key to that adoption rate is the age of the company, Kelsey concludes.

To put the entire opportunity in context, it’s useful to revisit BIA/Kelsey‘s U.S. Local Media Forecast, released earlier this year, where BIA/Kelsey chronicled a devastating decline in local advertising spend in 2009 and 2010. The firm doesn’t anticipate any recovery until 2011, nor any real strengthening of the local ad market until 2012.

That is more than $27 billion of local advertising that will have evaporated during the recession. Within this macro trend, a fundamental secular shift is underway, says points out Polachek, president of BIA/Kelsey

“The general economic conditions worsened during 2009 causing advertising dollars to remain on the sidelines as businesses — large and small, local, regional and national — reined in spending levels,” said Polachek. “Even with improvements in the overall economy, we do not anticipate a rapid recovery among traditional media over the forecast period, because we believe the structural change in the local media industry has accelerated.”

This structural change is highlighted in BIA/Kelsey’s most recent update to its Local Commerce Monitor, a local tracking study that the firm has been doing over the past several years.

The ground-level research of SMBs reinforces the overall outlook for local advertising.

The Local Commerce Monitor study also revealed a decrease in overall ad spending by SMBs, owing to unfavorable economic conditions and the long-term substitution of traditional media with lower-cost digital/online media. SMBs decreased spending on advertising and promotion by 23.5 percent, from $2,734 annually (reported in August 2008) to $2,092 annually (reported in August 2009). In spite of the overall decrease in spending on advertising and promotion over the past 12 months, on average, SMBs increased spending on Web sites and profile pages by 26.8 percent, from $608 in 2008 to $769 in 2009.

Kelsey does chronicle on notable shift among SMBs: they have personally begun to use more digital media than traditional media. This usage shift will drive accelerate the shift in marketing purchases, BIA/Kelsey contends.

The younger the business, the more likely they are to spend heavily on internet advertising, BIA/Kelsey points out. Businesses less than 3 years old will spend close to 1/3 of their budget on internet, while businesses more than 10 years old will spend only 13%.

The obvious conclusion, Kelsey points out, is to target younger businesses with digital offerings.

The success rate is likely to be much higher.

The dollars at stake are meaningful.

Indeed, a steady shift toward digital media continues. BIA/Kelsey forecasts spending on traditional media to decline from $115 billion in 2009 to $108.2 billion in 2014 (CAGR of -1.2 percent). During the same period, spending on online/interactive media is projected to grow from $15.2 billion to $36.7 billion (CAGR of 19.3 percent).

Over the next five years, a focus on emerging businesses as the foundation of digital growth is a strategy that is likely to be rewarded.

Related articles by Zemanta

• Local Ad Spend to Climb 2.2% through 2014; Shift to Digital Continues: BIA/Kelsey (marketingvox.com)
• Local Advertising to Make Gradual Comeback With Digital Leading the Way (marketingpilgrim.com)
• Highlights From the Most Recent BIA/Kelsey Local Commerce Monitor and User View Surveys (blogs.praized.com)

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