Report: Local digital ad revenue expected to nearly double by 2015 in U.S.

By Chris Hogg

According to a press release issued today, BIA/Kelsey is forecasting a significant bump in local digital ad revenue over the next four years. The research and consulting firm says local advertisers are going to steadily migrate to digital media properties and revenues are expected to climb to $42.5 billion in the U.S. by 2015. That is almost double the $21.7 billion generated last year.

“This growth coincides with anticipated improvement in the U.S. economy and a continued rise in overall local advertising, which the firm expects will reach $153.5 billion in 2015, up from $136.3 billion in 2010, representing a 2.1 percent [compound annual growth rate],” the release states.

Some consider local advertising to be the Holy Grail of digital revenue, but it’s an area that has yet to fully maximize its potential. Small companies who have money to spend often find online advertising complicated or confusing to measure. Many also lack the resources or technical know-how to manage online advertising, so they simply don’t do it.

A growing exception to the rule are daily deal companies like GroupOn that have provided a very simple way to spend and measure return on digital investments. Google is also pushing its Google Places product for small business to get listed online.

BIA/Kelsey predicts digital media — including mobile, Web or other electronic means — will represent 23.6 percent of all local ad spending by 2015.

“As the business climate improves and advertisers step back into the market, they are gravitating to digital options that perhaps were not as mature before the recession began,” Tom Buono, CEO of BIA/Kelsey, said in a press release. “Our analysis indicates that as advertisers move to online, mobile and, particularly, the variants of social media, we are fast approaching a tipping point where digital media will soon become a dominant segment of the local advertising marketplace.”

Among the key drivers for increased digital spending are the growing number of smartphones and tablets; declines in newspaper revenue and the rise of paywalls; and interactive and online sectors are advancing rapidly with new options and formats.

Finally, BIA/Kelsey believes the social part of digital media is increasingly becoming a core channel for revenue. The company says the daily deal space alone will grow to $3.9 billion by 2015 and both Twitter and Facebook will be part of this expanding market.