Local Ad Spending Growth to Slow

Local interactive ad spending growth is expected to slow to around 8 percent in 2009 from 47 percent growth this year. A new Borrell Associates report, “2009 Outlook: Big Slowdown Begins for Local Interactive Advertising,” curtails the research firm’s projections for online local advertising slightly due to the recent economic downturn.

“Local media companies projecting double-digit and even triple-digit increases in their interactive budgets next year will have a very difficult time meeting those expectations,” noted the report.

Still, the company predicts interactive media spending will rise 7.2 percent next year as offline media spending falls 1.4 percent.

While most forecast models account for normal variations and business activities, Borrell stresses that the recent financial tumult makes it difficult to truly predict what will happen with local ad spending next year.

Advertisers who change their spending plans under the market conditions could alter the direction of online advertising in the long run. “What often happens when there is a crisis is that things never get all the way back to normal,” said Colby Atwood, president of Borrell Associates. “We’ve seen this in a couple of instances where things will drop down, and when they come back they come back in a different form. There will be acceleration in more interactive media, acceleration of newer forms, and away from traditional banner ads. This is a trend that’s been occurring anyway, but the current financial crisis has been accelerating that trend.”

Some believe small local businesses may actually pull ad budgets next year. “To the extent that small businesses regard marketing as a discretionary element, we may see a pull-back on that,” Greg Sterling, principal of Sterling Market Intelligence, told ClickZ. “We may see a blip and a return to pre-recession levels or a correction,” he added.

Newspaper sites that still rely on selling mainly banners, tile ads, and classified listings are expected to feel the pinch. “Those are the slowest, and most of the growth is occurring in video ads, search, and e-mail,” said Atwood.

“To the extent that their revenue depends on banner ads, their growth will be slower than the market, because banner ads are growing more slowly,” he said.

Advertisers have a degree of control, according to Sterling. “There’s a lot of wheeling and dealing going on in this economy,” he said. “The buyers have a lot more leverage now than they used to.”