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The U.S. interactive classified and vertical share of online advertising will grow from 18 percent in 2007 to 24 percent by 2012 according to The Kelsey Group.

Revenues for interactive classifieds will grow from U.S. $3.9 billion to $14.7 billion during the same forecast period, representing a 30.5 percent compound annual growth rate (CAGR).

"Vertical businesses are harnessing the network effects of the Internet, much like Expedia and others did for travel in the late 1990s," said Kelsey Group Program Director Peter Krasilovsky, cochair of Drilling Down on Local '08.

"We're seeing an accelerated effect from fragmentation, which will draw ad revenue from traditional media toward online vertically targeted solutions."

During the forecast period, U.S. online classifieds will increase from $3.9 billion to $9.1 billion (18.6% CAGR) and online verticals (such as home services, home and garden, health care, legal and auto repair) will grow from $100 million to $5.6 billion (461.4% CAGR).