U.S. Local Ad Market to Contract Through 2013, Despite Gains in Digital Segments

CHANTILLY, V.A. (February 26, 2009) – Current and foreseeable economic conditions will reduce overall local advertising spending through 2013, according to the U.S. Local Media Annual Forecast (2008-2013) by BIA Advisory Services, LLC (www.bia.com) and its Kelsey Group (www.kelseygroup.com) division. BIA/Kelsey forecasts U.S. local advertising revenues to decline from $155.3 billion in 2008 to $144.4 billion in 2013, representing a negative 1.4 percent compound annual growth rate (CAGR).

Only the local interactive segment will show growth throughout the forecast period. All other local media will experience marginal to rapid declines in the next 18 to 36 months. A small number of traditional media will rebound with a revived economy beginning in 2011, though most traditional media will continue to decline, albeit at a slower pace.

“By the end of the forecast period, the overall size of the local advertising market will be considerably smaller than it was at the end of 2008,” said Tom Buono, president and CEO, BIA Advisory Services. “As the shift to online accelerates, and the demand for accountability metrics grows, there is an increased urgency for traditional media companies to develop and embrace new business models that incorporate digital strategies in order to drive business over the next decade.”

BIA and The Kelsey Group project the interactive share of local ad spending will more than double from 9 percent in 2008 to 22.2 percent in 2013. According to the forecast, the interactive segment (encompassing mobile, Internet Yellow Pages, local search, online verticals and classifieds, voice search, e-mail marketing and other interactive revenues generated by traditional media players) will grow from $14 billion in 2008 to $32.1 billion in 2013 (at a CAGR of 18%), while the traditional segment (encompassing newspapers, direct mail, television, radio, print Yellow Pages, out of home (non-digital), cable television and magazines) will decrease from $141.3 billion in 2008 to $112.4 billion in 2013 (CAGR of -4.5%).

"Within the local advertising sector, there will be a real share shift, and the players most ready to leverage and adopt interactive models will achieve greater success going forward,” said Neal Polachek, CEO, The Kelsey Group. “The share shift we expect could actually be more pronounced if the major traditional media are not able to integrate new interactive products into their bundle. Successful integration will require considerable attention to business models, product innovation and sales channel evolution.”

BIA/Kelsey U.S. Local Media Annual Forecast – The Big Picture on ‘Local’’

This year’s forecast is the first to combine the deep and complementary resources and expertise of BIA and The Kelsey Group. It presents one comprehensive and authoritative view of the local media landscape, consisting of nine key segments: newspapers, direct mail, television, radio, print Yellow Pages, out of home (non-digital), cable television, magazines, and all digital and online interactive (which comprises mobile, Internet Yellow Pages, local search, online verticals and classifieds, voice search, e-mail marketing, and other interactive revenues generated by traditional media players).

BIA/Kelsey defines local advertising as spending by small and medium-sized businesses (SMBs), national advertisers and regional advertisers making local buys. The BIA/Kelsey U.S. Local Media Annual Forecast (2008-2013) draws from proprietary data; company, industry and country information in the public domain; and discussions with clients and non-clients about the direction and pace of development in the local media marketplace. Building off the forecast research, BIA/Kelsey will begin offering BIA Media Ad Views, market-specific custom reports that provide a comprehensive picture of the state of local media advertising and a five-year projection for nine different media segments.

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