Indeed, after a decade of testing the Web, local advertisers are making significant adjustments to their marketing dials, turning up the volume on online advertising, says local media research firm Borrell Associates. The firm predicted local search advertising will more than double next year to $5 billion, while locally placed online video will triple to almost $1.3 billion.

The report suggests that next year will be a perplexing one for local media companies trying to tackle the Web. "Most yellow pages publishers, cable companies, newspapers, radio stations, and TV stations are still pinning their hopes on their traditional sales reps being able sell online ad packages," the report reads. "But there is increasing evidence to support the idea that a greater investment in an independent online sales force will be necessary to continue the growth these properties have enjoyed for the past few years."

Key Advertising Segments

The growth rates for most local media operators have slipped well below the overall growth rate for local online ad buys, the report revealed, which suggests these properties are losing market share. Pure-play Internet companies hungry for the growth they see in the local market are capturing much of that share, the report said, and are seeing benefits from partnering with local media companies to supplement their own efforts.

"Key advertising segments for 2008 will continue to be the Big 3 classified categories of automotive, recruitment, and real estate, with online political marketing holding promise for local sites as state and presidential campaigns heat up," the report offered. "A major component of local video advertising will be long-form pieces for home, automotive, and health-related categories."

Marketing budgets will accelerate their shift out of traditional advertising formats -- both online and offline -- and into non-ad activities such as promotions and public relations, Borrell predicted, noting that the latter is better at delivering the improved targeting and accountability that advertisers are demanding.

Automotive Leads the Way

Borrell's numbers don't quite line up with other market researchers. Veronis Suhler Stevenson projects roughly $6 billion in local search and online yellow pages spending by 2011. Emarketer projects local online advertising spending in the U.S. will reach $7.8 billion by 2011. And The Kelsey Group forecasts global local search and online classified advertising revenues will grow from $15.7 billion in 2005 to $31.1 billion in 2010. However, all the forecasts point to the same conclusion: growth of local ads. (continued...)

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