Jupiter: Local Advertising Will Attract $2.7 Billion by 2003

The rise, predicts Jupiter, will come about because of increased overall ad spending, an improved ability to target ads geographically, and increased consumer use of local content.

Companies like Real Media, whose ad network includes local newspapers, and city guides like Citysearch.com, have concentrated much of their efforts on local advertising, but the market hasn’t ever really taken off. Real Media, in fact, recently shifted its strategy to emphasize vertical networks in content areas like sports and travel.

Citysearch.com earlier this year subsumed Microsoft‘s Sidewalk.com, in a merger that some attributed to a weakness in the market for local offerings.

Although more than half of traditional advertising is local, the 71 percent of marketers that buy local ads on the Internet spend just a fraction of their budgets on geographically-targeted buys, according to Jupiter.

“Local advertising is still in its infancy, but we are at a critical inflection point, given consumers’ increasing attraction to local content,” says Claudine Singer, an analyst with Jupiter’s online advertising strategies practice.

“This is, however, the publishers market to make–to drive growth, publishers need to aggressively address advertisers’ reluctance head-on, and effectively demonstrate the value proposition of local advertising online.”

A recent Jupiter Executive Survey found that advertisers were hesitant to spend money on local buys because they were concerned about the value of click-through rates, inefficient geographic targeting technologies, and the variety of online and off-line alternatives competing for their dollars.

The answer to these concerns, according to Jupiter, is to use technology to provide advertisers with sophisticated targeting and reporting, to prove that local buys make a good investment.

“Publishers should also analyze their sites to determine which ads work and which do not, and systematically share aggregate, high-level observations with advertisers to help them optimize local execution,” adds Patrick Keane, senior analyst with and director of Jupiter’s online advertising strategies practice.

Jupiter’s report concludes that media companies with a variety of platforms are best positioned to lead the growth in local advertising, because they can offer ad packages that include online properties, thereby helping advertisers grow accustomed to buying Internet ads.