Local Online Advertising Not Living up to Hype

Market Wire, June, 2006

Local online advertising, once hyped as an indispensable resource for Internet shoppers, has yet to deliver on that promise. Online local ad spending growth is huge -- but the growth emerges from such a small base that local makes up only 8% of online spend this year. Even when local online ad spending jumps by nearly 51% next year to $2 billion, it still will not quite be 10% of the 2007 ad spend estimate of $20.3 billion, according to eMarketer's new report, "Local Online Advertising: Measuring the Potential."

Worse, there is an imbalance in local ad spending when online and offline figures are compared. For example, in 2008 local will make up nearly 35% of total media, while eMarketer predicts local at not quite 12% of Internet ad spending.

What is holding online local back?

"One should never underestimate inertia and tradition when trying to gauge future paths for the local online ad market," says David Hallerman, eMarketer's senior analyst, and author of the report.

He points out that yellow pages and some newspapers bundle Internet and print sales, which not only increases the total price, but also undercuts the strategic importance of the Internet to local marketers. Too many merchants are set in their brick-and-mortar ways -- lacking the ad budgets and ease with the Internet that would make advertising online more palatable.

But, the consumers are not there yet, either. Although broadband usage has hit critical mass, with 63% of the total US population now going online, a study of visits to Google domains during one representative week in May showed that of all visits to Google only 0.05% of those visits were to Google Local.

Where there is local online ad growth, paid search is the prime force supporting it, providing over 55% of the local total.

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