Conference Notebook: Online Local Market Share to Hit 22% in 2013

After a decade of upheaval, local online advertising revenue is set to exceed local newspaper dollars in 2013. Speaking at the Local Online Advertising Conference in New York Wednesday, Gordon Borrell, CEO of Borrell Associates, said that local online advertising’s market share is set to increase to 22% in 2013, passing local newspaper revenue by two points. What’s more surprising is that the writing is on the wall for the web as well — Borrell predicts that by 2016, 88% of all local online advertising will be delivered on a mobile device.

So what else can we expect in 2016? Panelists and speakers at the conference had a lot of forward thinking ideas about where local online is headed.

For one thing, cut-and-paste banner advertising in local is out. Targeted display advertising, according to Borrell, will jump from 22% of ad spend in 2011 to 87% of local online ad spend in 2016. Peg that to industry growth projections, and we’re talking about an 868% increase in total revenue driven from targeted display.

The jump points to an important shift in the way in which national brands in particular will think about local — and even mobile for that matter — as a medium for advertising. While local advertising (advertising to city and community-level markets through local media) will remain, location advertising (leveraging geographic indicators to reach a range of audiences) will dramatically expand the market for “local” advertising.

“There will be no division between national and local as we talk about it today,” Shawn Riegsecker, CEO of media logistics firm Centro, told an audience largely composed of legacy local media players Wednesday morning. “Everything is local because the world looks a lot different when you start looking at data.”

Much of the conversation centered on the future of legacy local media companies themselves, which Riegsecker said, would exist in 2016, though not in their current form.

The good news for newspaper companies is that in 2011 local media controlled 92% of all advertising, and over half of online local ad spend. Market share for pure-play local advertisers like Yodle and Google appears to have hit a wall around half of local online ad revenue, leaving a ravaged but sizeable chunk.

This is not to say the disruption is through. 2016 will likely see a far different local media landscape than exists today. Here’s a snapshot of the local media brand in 2016:

— The survivors will be media, not medium companies. CBS Local, which has shift to an integrated, “quad-casting” model over the past two years, saw a 40% increase in digital revenue last year alone. In a presentation Wednesday, Ezra Kucharz announced the release of a tablet application, which draws content from its print, radio, web, and television properties.

— Think marketing not advertising. With “non-ad” revenue accounting for 72% of local marketing spend in 2011, local media companies need to offer everything from deals to paid search. A host of white-label tech startups as well as existing players like Google are building a business model around partnering with local media companies to scale marketing products.

— Community newspapers will be thriving. Yes, newspapers. Both Borrell and Riegsecker project growth for small-radius newspapers over the next four years.

Steven Jacobs is an associate editor at Street Fight.