Local Search to Hit $13B by 2010

The global online local search market, which includes Internet Yellow Pages, local search and wireless, is set to grow from the $3.4 billion it brought in last year to nearly $13 billion by 2010. That’s according to a new forecast by the Kelsey Group.

The company’s report projects a 30.5 percent growth rate over the next four years.

By contrast, print Yellow Pages revenues are forecast to increase just 1.5 percent to reach $28.4 billion over the same time period. But Kelsey Group analysts don’t see online Yellow Pages taking market share from their print counterparts.

“I think there’s going to be some substitution, but it’s mostly going to be incremental growth,” said Greg Sterling, SVP and program director of interactive local media, for the Kelsey Group. “A lot of the dollars that are going to happen will not be a direct substitution. The area we’ll see the greatest erosion is in the classifieds.”

Online classifieds will continue to grow while offline forms decline slightly, despite the fact that Craigslist-like “free” models limit revenue growth online. Kelsey Group doesn’t separate online and offline classifieds, but expects that across the board, classified advertising revenues will drop a fraction of a percent from $79.5 billion in 2005 to $78.5 billion in 2010 globally.

National advertisers account for much of the growth in the digital formats the report covered. “Online players will benefit more from national advertisers while Yellow Pages players will be more successful in the local or small business market,” the forecast said.

The report groups wireless with Internet Yellow Pages and local search. “That’s perhaps the most uncertain piece of the forecast,” said Sterling. “There’s a lot of pent-up demand for mobile experiences, but the user base isn’t there to drive an advertising model.”