Kelsey Group Annual Forecast: Interactive Advertising Revenues to Reach US$147 Billion Globally by 2012

The Kelsey Group released their Annual Forecast (2007-2012) today. The Kelsey Group is the leading provider of research, data and strategic analysis on directories, small-business advertising, online local media, vertical market advertising and mobile advertising. According to the Annual Forecast, the global advertising market will be fueled by exceptional growth in the interactive segment.

Some interesting highlights from the press release:

Interactive advertising revenues will increase significantly from US$45 billion in 2007 to US$147 billion globally in 2012, representing a 23.4 percent compound annual growth rate (CAGR).

“We see Internet development—including increased subscriber/user access and broadband penetration—as a driver of both interactive advertising revenue as well as migration of traditional ad spending to new media platforms.” -Matt Booth, senior vice president, Interactive Local Media, The Kelsey Group.

Interactive advertising, which comprises search (including local search), display advertising, classifieds and other interactive ad products, grew its share of global advertising revenues from 6.1 percent in 2006 to 7.4 percent in 2007. By 2012 Kelsey Group analysts expect the interactive share of global ad spending will reach 21 percent.

Directional advertising, which comprises local search, print Yellow Pages and Internet Yellow Pages (IYP), will grow from US$33.3 billion in 2007 to US$41.4 billion globally in 2012 (4.5 percent CAGR).

  • Local search revenues will grow from US$2.1 billion to US$6.6 billion (25.5 percent CAGR).
  • Print Yellow Pages revenues will decline from US$27.5 billion to US$25.6 billion (-1.4 percent CAGR).
  • IYP revenues will grow from US$3.7 billion to US$9.2 billion (20.1 percent CAGR).

What does this mean to a small business’s online marketing budget? My bet (and I’m really going out on a limb here) is that costs are going to increase as more small businesses begin advertising online. Cost-per-click (CPC) bids are going to increase for the majority of keyword phrases and advertising rates for local search directories and Internet Yellow Pages (IYPs) will increase.

Small businesses that follow best practices for search engine optimization and provide the informational content that online consumers want will reduce their dependence on online advertising for leads and customers.

Marchex and Idearc Media Announce Local Advertising Agreement

Marchex, Inc., a local online advertising company and leading publisher of local content, and Idearc Media Corp., home to Superpages.com and publisher of the Verizon Yellow Pages, announced a local advertising distribution agreement under which Idearc Media will place its Superpages.com performance-based advertisers on Marchex’s network of Web sites through Enhance Interactive, Marchex’s advertising network.

Marchex’s local network attracts more than 25 million unique monthly users who rely on the company’s more than 150,000 local Web sites to get relevant and refine-able information about local businesses nationwide. Enhance Interactive provides additional distribution across local Web sites, online publishers, and leading search engines.

This sounds like a good partnership to me. Marchex offers phenomenal reach to potential customers. As long as local businesses have effective landing pages and overall good website usability, I can see the value in paying for advertising on their network. I’m hoping that’s what Idearc means by “performance-based advertisers.” 😉