The paltry $420 million spent in 2005 on local search advertising was the calm before the nine-digit storm begins this year.
Borrell Associates predicted the kind of growth for local advertising on search engines that has driven the likes of Google, Yahoo, and Microsoft to put a lot of effort into their local products online. A brief from Borrell said local search ads would brush against the billion-dollar mark in 2006.
The money being spent on that local search is coming at the expense of local traditional media companies. Borrell noted how this business is in decline and will continue to spiral downward:
Their Web operations continue to rely almost exclusively on selling banners and listings, a form of online advertising that will grow slowly then decline as local paid search takes over. Vendors with local search applications are clamoring to help companies catch up. Local media companies should have one foot on the local search/local commerce bandwagon already, with plans to “go deep” in this area. It’s a question of survival.
Local advertisers are not just dipping a toe in the paid search waters. They are splashing around like dolphins, and it’s just a matter of time before they turn search engine advertising into their personal Sea World. And traditional media will have to buy tickets to see them in action.
Borrell cited that greater experimentation by comparing local search ads now to those of eighteen months past. Back then, those local ads were “5.6 percent of sponsored links on the major search engines; today it’s more than one-third.” Some categories like real estate have percentages approaching 50 percent of sponsored links.
In the future, the report claimed some alterations could take place, with yellow pages becoming Web directories. The major search engines have been moving this way already, as have the yellow page companies. Borrell speculated a locally focused search engine could eventually emerge to grab the majority of that market too.
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David Utter is a staff writer for Murdok covering technology and business.
