Report: Digital Now Represents 40% of Local Advertising Market

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borrell-associates-logoAfter years of shifting revenues, it’s no surprise that digital continued to gain ground last year. What’s surprising, says Gordon Borrell, chief executive of Borrell Associates, is that the rate at which spending is shifting is actually accelerating.

A new report released by the research firm suggests that digital advertising will continue to be responsible for nearly all growth in local advertising in 2015. Spending on local digital marketing accelerated in 2015, growing from 40% in 2014 to 42% in 2015. By the end of the year, the report estimates local digital advertising spending will hit $47.8 billion, accounting for two-fifths of the $115 billion local advertising market.

“As with any quantifiable evidence, I hope it underpins the story that digital is a juggernaut that probably isn’t going to stop anytime soon,” said Borrell. “There are still a lot of people who are tired of hearing that story, they tune it out, or worse, deny it. So as we look at what was happening for 2015, we saw something that was just kind of crazy.”

The report predicts the explosive growth to continue until digital becomes the dominant form of advertising. Whereas in 2014, 38% of all online advertising was delivered on a mobile device, the reports expects that number to be 70% by 2019. More importantly, the report quantified which types of companies were spurring the growth.

“Some of the really high growth is coming from companies with a really small base,” said Borrell. “To some extent it’s the smaller companies, and to some extent it’s the companies that are acquiring other businesses.”

The report found that consumer-based content providers such as Trulia/Zillow, Yelp and Craigslist were among the companies experiencing the most growth. Borrell explained that is at least partly because the content each provides brings them close to a consumer on the verge of making a purchase.

“That’s where you want to be,” said Borrell. “ It’s so much not about readers. It’s so much more about consumers. So those folks who are trying to develop hyperlocal sites around good content really need to know, and the evidence in this report is very clear, the good content that needs to be developed is basically advertising or consumer related.”

The takeaway here is that content that doesn’t drive consumer data collection is useless. Borrell points out that providing a consumer with great content is worthless if that interaction isn’t converted into revenue.

“Unless you know who that person is, what they’re about to buy, their gender, their zip code, where they were last, that person’s not valuable at all,” he said. The companies that understand this are driving the growth in digital advertising, according to the report.

“Companies like that grew above the industry average growth rate,” said Borrell. “Some of it was through acquisition, but most of it was from selling the right types of things.”

Mason Lerner is a contributor to Street Fight.