Posted February 18, 2009 1:00 am by with 9 comments

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As if the news of yesterday regarding display ads wasn’t troubling enough there is more down news about alocal-search traditional providerof growth in internet marketing: the local ad market. As reported in the WSJ the local ad market is slowing down like other areas of internet marketing. Here’s a summary of the situation.

Online spending by local U.S. advertisers, which grew by 45% in 2008 to $12.7 billion, is expected to see growth fall to 5.4% in 2009, according to media-research firm Borrell Associates. Total U.S. online ad spending is expected to be about flat, declining 0.3% to $36.9 billion in 2009, compared with growth of 8.5% in 2008, Borrell says.

The startling part of that is number is the drop from 45% growth to 5.4% for local. That’s dramatic for sure. Of course, it is still growth which is a good thing especially considering the economy as a whole. According to the WSJ, local represents 1/3 of the total online ad spend so the impact of this slowdown is significant the online marketing industry as a whole.

The scramble is on for this shrinking piece of the local Internet marketing pie. Newspapers are desperately trying to hold on through their online presence. Yellow Page directories are attempting to retrain traditionally aggressive and often complacent sales forces to now sell their online offerings along side their traditional offerings. In addition, there are companies that specialize in optimizing local Internet ad spending like ReachLocal.

What should drive the continued growth, albeit slower growth, of local search is innovation. New product offerings from ReachLocal are designed to give local advertisers some of the advantages that are traditionally reserved for major marketers should help. Marchex is working to move into the mobile market. New York based Yodle is expanding its offerings and sales efforts backed by $10 million in VC.

It appears that for the foreseeable future the online advertising picture for all segments seems tempered at best. Even the mighty Internet is feeling the pinch but it’s not in the red just yet. Let’s celebrate that fact for now because there are a lot of people that would kill for growth of any kind.

  • The details in this article are probably true, but I must speak up on behalf of my former colleagues at the yellow pages.

    I took early retirement from AT&T Yellow Pages in December and to describe the yellow page salesperson as complacent is ridiculous. Most AT&T reps in my division handled over $750,000 dollars worth of advertising annually, placing fifteen hundred items for 300 different customers. Any unconcerned or self-satisfied (the definition of complacent) person would not survive.

  • It had to happen. In fact the spending in each virtue is reduced in the whole world. The economic crisis which emerged from the slowly rippling subprime issues, grew upto such an extent that most people have changed their spending habbits, small retailers had to shut down their shops and Online market is also affected a lot. But as the markets settles down slowly, hopes are sure that there would be some good news for the survivors.

    Tejaswini’s last blog post..Watch your favorite YouTube video as a background in Excel or other applications

  • @Julie Gallagher – Thanks for that information.

    I may have used the wrong word. The people who have described the culture to me at a large Yellow Pages provider said that the most senior reps had a great advantage and could ‘claim’ accounts from others due to specific phone exchanges etc. Also, they relied heavily on existing business with new business being won through the support of SMB specialists. It seemed like insurance sales where ‘survivors’ would get the lion’s share whether deserved or not simply on longevity and territorial rights. Once again a very informal survey from someone who was in the system.

    Great update Thanks.

    Frank Reed’s last blog post..Internet Statistics and the SMB: Believe At Your Own Risk

  • @ Julie Gallaher – Sorry for spelling your name incorrectly above. I hate it when that happens to me 😉

    Frank Reed’s last blog post..Internet Statistics and the SMB: Believe At Your Own Risk

  • The drop in growth is quite disconcerting, but as you pointed out, there is at least positive growth. One can expect the gold rush to slow and consolidate a bit, and advertisers becoming much more savvy on what constitutes good value for their advertising dollar.

  • Wow, that is quite a change – from 45 to 5.4 percent! I don’t think it really matters that that’s technically still growth because at that rate it will be a loss in no time. What does the future look like? Will 2010 see a loss, or once it falls 40 percent will it stay stagnant for a few years? Will it be dependent mainly on the economy or on other factors? Obviously, it’s unpredictable, but guesses can be made based on past data and research.

    Rachel Burkot’s last blog post..Emotional Targeting- Smart Marketing or Virtual Sucker Punch?

  • Frank

    No worries on the spelling or original commentary. Happy to set the record straight. ;^D

  • See and get an idea WHY this MUST happen.

  • Yes it takes time for things to come together. Great information thanks heaps