Local Ad Revenue Is Expected to Increase
Total local advertising revenue in the United States is expected to grow moderately, from $145.2 billion in 2016 to $148.2 billion this year, with the strongest increase in online and digital advertising, according to research from BIA/Kelsey.
While the total ad revenue increase represents a growth rate of 2.4 percent and jumps to 3.9 percent when political advertising is excluded, online and digital advertising will surge 13.5 percent, growing from $44.2 billion in 2016 to $50.2 billion in 2017.
In contrast, traditional advertising revenue, such as print and broadcast, will see a decrease of 2.4 percent, going from $101.1 billion in 2016 to $98.6 billion in 2017.
“People are still using direct mail, local magazines, and newspapers, even the print edition [as] part of their advertising mix, but certainly not to the extent that it once was,” says Mark Fratrik, senior vice president and chief economist at BIA/Kelsey.
Mobile advertising in particular is gaining strength. According to Fratrik, it is showing double-digit increases each year, and the report projects that mobile advertising will account for 10.8 percent of all local advertising revenue in 2017. This figure compares favorably with the projections for a number of other outlets, with print newspapers expected to account for 8.3 percent of the local advertising revenue pie, and magazines accounting for just 1.1 percent.
The report identifies three key areas of growth in the online and digital advertising space. The first of these is desktop display, which is expected to have a 10.3 percent compound annual growth rate. As broadband access continues to improve, streaming and sharing high-quality content will become easier.
The second area is local search on desktop devices, which is expected to increase at a 5.7 percent compound annual growth rate. Mobile devices will continue to take search dollars from desktop devices, the report notes, but large players such as Google will continue to succeed in that area.
The third area, email, is expected to register a 4.7 percent compound annual growth rate, continuing to be an essential tool for marketers as consumers opt in to more lists delivered by their favorite companies.
“The ability to really target the message to potential buyers that may be located within a geographic distance or have expressed interest through their online searches or websites they go to—that’s a real benefit for advertisers who want to really have a more successful advertising mix,” Fratrik says. “The targeting aspects of the digital advertising platforms provide the impetus for the growth.”
Nevertheless, analog advertising is still expected to play a role in 2017. Direct mail is projected to account for nearly a quarter of local advertising revenue, at 24.9 percent, indicating that marketers do not intend to completely abandon traditional advertising avenues in 2017.
While print is declining quickly, other media are not declining as fast, Fratrik points out. “Direct mail still is being utilized by a large percentage of advertisers, and that includes catalogs as well,” he says. “You have companies that will use a catalog to show the different colors that are available for a certain dress, or different types of cars, whereas online may be more about what’s available at a particular store at a specific price.”
Successful advertising, Fratrik says, is about finding the right balance. “It’s an advertising mix; successful companies are utilizing different media for different purposes.”