Local Spend on Social Media to Increase Seven-Fold by 2016

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Borrell Associates, a research firm that specializes in tracking local online advertising, released a report this week that takes a deep dive into the use of social media by small and medium-sized businesses (SMBs). The big takeaway from “Main Street Goes Social” is that local merchant spending — not simply presence — on social media will explode over the next four years.

The Virginia-based research group sees the total local online social spend growing from an estimated $1.1 billion in 2011 to $7.8 billion in 2016, with the local’s share of the total spend doubling from 12 percent to 24 percent over the same period.

In addition to social media advertising — which includes paid search and display on sites like Facebook and Twitter — the report includes promotional spend, like loyalty programs and discounts/deals among others, as part of the social marketing mix. Promotions, which account for more than a third of spending nationally on social sites, play a far smaller role in local markets. The discounts/deals category, which made up roughly 90% of promotional spending locally in 2011, accounted for less than 9% of the total spend in local/social in 2011 and is set to lose share points over the next few years, according to the report.

As far as local is concerned, targeted display advertising appears to be the big winner in the near-term. With 100% year-over-year growth predicted in 2012, spending on targeted display is set to account for over 45% of total local/social spend this year. Facebook, which dominates social spend with 64.8% of the market share, added zip-level targeting and will likely cash in on much of this growth.

The report rightly attributes much of the forecasted growth in social to the explosion of mobile in 2011. The emergence of location-aware and app-enabled smartphones is allowing for an increasing convergence between media and commerce in a physical environment. Though SMBs have traditionally lagged behind national brands in online innovation, some believe that the hyperlocal element to mobile devices may make for a more seamless transition for local advertisers.

However, as far as hyperlocal marketing is concerned, the findings are encouraging but not a slam-dunk. Local promotions are major point of focus for a set of emerging hyperlocal companies and the muted outlook for the promotional vector is a discouraging, albeit small, data point.