Report: Online and Digital Ads to Reach 25% of Local Media Revenues in 2015

Total local media revenues are expected to reach $139.3 billion next year, up from $137 billion this year, for a 1.6% growth rate, with digital and online advertising surpassing the one-quarter mark for the first time, according to BIA/Kelsey‘s 2015 U.S. Local Media Forecast.

The shift to digital and online advertising is expected to reach $35 billion (25.2%), representing a 13.1% growth rate from $31 billion and a 22.6% share in 2014. Within this segment, the mobile market shows the strongest growth, jumping from $4.3 billion to $6.6 billion in 2015, for a 54.2% growth rate. National social media ad spend will see a 36.8% boost, from $8.2 billion to $11.2 billion. Social’s local share will increase from 30% ($2.5 billion) to 32% ($3.6 billion).

“Mobile and social are growing faster than imagined. But it’s a little challenging in our forecast because social advertising is part of regular online advertising as well as mobile,” said Mark Fratrik, the local research company’s chief economist. Still, “every time we do a forecast, we up the growth of mobile and social based on companies doing remarkably well. It was only a few years ago there was some concern whether or not Facebook would be successful moving into mobile. I think that question has been answered now. Every quarter, the percentage of revenues is surprising that comes from mobile.”

In other categories,

• Local search revenues will grow from $7.1 billion to $7.2 billion (1.6% growth)
• Local display revenues will grow from $4.3 to $4.9 billion (13.5% growth)
• Local online video revenues will grow from $2.3 billion to $3 billion (34% growth)

These trend lines look to continue. There’s a movement throughout the U.S. where businesses are becoming more comfortable with online and social advertising, Fratrik noted. “They understand how it fits into the advertising mix, and it’s worked pretty well. From other research we do of small and medium businesses, [businesses] are very pleased with the response they get and the ROI from mobile and social advertising.”

When asked whether digital advertising rates will ever catch up to print rates, Fratrik was optimistic.

“I definitely do think so because from what I read, some social CPMs that are coming on, some that Facebook is able to charge, are pretty high. But those are very targeted ads. More general online ads may have more difficulty, but if you’re able to show and provide specific types of audiences in specific markets that fit a company’s needs, certainly they can get some very high CPMs.”

Still, even though traditional media shrank 1.7% to $104.2 billion, Fratrik emphasized that it isn’t going away, it accounts for nearly 75% of local advertising revenues, and it’s “still an important part of building the brand. They complement each other.” The forecast covers 12 market segments.

“Newspapers we’re obviously seeing a decrease, but radio, TV, cable, even out-of-home are still an important part of different types of advertising businesses,” Fratrik explained. “I’m always struck when I hear that an Internet company or Google or Facebook utilize radio, because they see like other businesses that it’s one part of an advertising campaign.”

He also noted that some businesses are also moving into other non-advertising, marketing-related activities, such as content sponsorships, and that BIA/Kelsey is working on a process to estimate more non-advertising marketing dollars.

“A lot of advertisers are moving into that. Whether it’s deals, loyalty companies, search engine optimization, or the amount spent on their website and integrating their own websites — these are all important expenses that businesses are increasing outlays to,” he said adding, “The whole daily deals thing — while that may not get a lot of publicity any more, it’s still out there. You can still get a deal and SMBs are utilizing that to get new customers. It’s a complex thing.”

When making decisions for next year’s advertising budget, businesses that have not yet embraced social and mobile should be encouraged to do so, Fratrik noted, “because the reason we expect social, mobile, digital, and online to increase at such a high rate is because people find it to be working in their advertising mixes.”

Donna M. Airoldi is a contributor at Street Fight.