Local Online Ad Revenue To Top $42 Billion

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Online/interactive advertising revenue is forecast to reach $42.5 billion by 2015, nearly double 2010's $21.7 billion, representing a compound annual growth rate (CAGR) of 14.4 percent, according to a new report from BIA/Kelsey.

This growth is tied to anticipated improvement in the U.S. economy and a continued increase in overall local advertising, which is expected to reach $153.5 billion in 2015, up from $136.3 billion in 2010, representing a 2.1 percent CAGR.
As digital media -- delivered to consumers through mobile, Internet or other electronic methods -- continues to gain traction with local advertisers, BIA/Kelsey predicts it will represent 23.6 percent of all local ad spending by 2015.

"As the business climate improves and advertisers step back into the market, they are gravitating to digital options that perhaps were not as mature before the recession began," said Tom Buono, chief executive officer, BIA/Kelsey.

"Our analysis indicates that as advertisers move to online, mobile and, particularly, the variants of social media, we are fast approaching a tipping point where digital media will soon become a dominant segment of the local advertising marketplace."

Other highlights from the report include:

*The increased number of smartphones and tablets is already playing a role in affecting revenue shares earned by traditional media.

*Continued significant newspaper revenue erosion will drive pay walls and other creative approaches for rebuilding revenue base.

*The interactive/online sector continues to advance and multiply with new formats such as social and mobile.

The report also found that social media is increasingly becoming an important part of online revenue. Consumer spending on deal-a-day offers, which the firm expects will grow to $3.9 billion by 2015, illustrates an expanding market that includes Facebook and Twitter.

"What we're seeing in terms of media share shifts and transformation is really unprecedented," said Neal Polachek, president, BIA/Kelsey.

"As we look forward, the core issue challenging advertisers is to figure out a media plan that leverages the transactional nature of digital media with the scale and reach of traditional media."

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