Local Is Primed for Growth Agree Borrell and Jupiter
On the very same day, both Borrell Associates and Jupiter released reports that are quite bullish on the local space. Jupiter, which had taken something of a contrarian position about the outlook for local search (previously the company projected $879 million for local search by 2009), appears now to be somewhat more enthusiastic about local.
In a press release reporting data from its forecast, the company said that local online ad spending will reach $5.3 billion in 2010, but qualifies that projection by saying that "classifieds will continue to comprise almost 70% of that total throughout the forecast period."
The problem there is continuing downward price pressure on online classifieds, which may erode revenue growth for online publishers. However, as a total view of the online local market, the Jupiter forecast would appear to be conservative.
Separately, Borrell said that local search (as a subset of overall online local spending) will reach $4.07 billion by 2010.
The Kelsey Group has projected that the local search component of the online directional media market will be worth approximately $3.4 billion in 2009. Comparing the these numbers is a bit of an apples to oranges challenge, however, given that definitions and methodologies are different.
Here's an interesting line from the Jupiter release regarding PPCall:
In a JupiterResearch/Virtus executive survey of advertisers who typically use Yellow Pages, about 30% of the executives surveyed were interested in pay-per-call, but over 40% said they were "very uninterested."
There's no mention of the remaining 30% (presumably a "not sure" response). But these findings are curious because Jupiter did the initial research for Ingenio on the potential acceptance for calls (vs. clicks) and found considerable demand. Of course, I don't know the population they surveyed among Yellow Pages advertisers so it's hard to truly assess these findings.
But the research is inconsistent with what we've found empirically and anecdotally—that a large majority of traditional small businesses are interested in a performance-based ad model using the telephone.
Overall, these high-level forecasts are indicators that there's general consensus about the growth potential in local (across several ad models). The challenging questions involve how quickly the market will grow, what ad vehicles will be adopted and what factors and channels will enable adoption.
As we've said before, there's enormous complexity in the small business segment of local. That's why at ILM:05 we're trying to get below the "30,000 foot view" into the weeds and really assess the drivers and challenges in the local market, even as it's rapidly evolving.