Local Ad Revenues Reach Nearly $150 Billion In The U.S. This Year
U.S. local ad revenues are expected to reach $148.8 billion in 2019, ahead of original estimates due to a strong economy, early political advertising and healthy mobile ad spending. BIA Advisory Services, a provider of research, analysis, strategic consulting and valuation services for the local media industry, has updated its U.S. Local Advertising Forecast 2019, noting that the total local media marketplace in 2019 will be slightly stronger than expected earlier in the year. BIA defines local advertising as all advertising platforms that provide access to local audiences for national, regional and local marketers.
Traditional media will retain a significant portion—60 percent—of the overall spend, $89.2 billion, with digital ad revenue at 40 percent with $59.5 billion. However, the future of online/digital advertising revenue is progressively increasing, with a 2018-2023 compound annual growth rate (CAGR) of nine percent. Over the same period, traditional advertising revenues will see a decrease in the 2018-2023 period with a CAGR of negative 1.4 percent.
“This is a very interesting time for local media,” says Mark Fratrik, senior vice president and chief economist at BIA Advisory Services. “Although it’s a non-political year, the sheer number of Democratic candidates running and the significant attention this presidential race is garnering is driving earlier than usual advertising revenue across television and mobile/social channels. Additionally, we are more bullish on certain digital advertising platforms like mobile due to its targetability, measurability, attribution and high level of adoption by consumers.”
According to the forecast, the top five media—revenue and share of market—in order of largest to smallest contribution in local advertising for 2019 are direct mail, local video, mobile, desktop/laptop/tablet and local radio.
Direct mail—such as direct solicitation, couponing and catalogs—is expected to bring in $37.2 billion, a 25 percent share. It remains an effective means of communication to reach certain households for national and local advertisers. BIA’s methodology for calculating direct mail ad revenue includes the cost of the full delivery, including materials and postage, unlike digital , which typically has a lower production cost.
Local Video, including local Over-the-Air (OTA) TV, local cable, local online video, out-of-home video and mobile video, is expected to account for $29.5 billion, a 19.9 percent share. BIA notes that the local video ad market is becoming very competitive with online, out-of-home and mobile video with OTA TV remaining dominant in capturing local video advertising, even in 2019 without substantial political advertising.
Mobile advertising revenue is growing rapidly on all fronts and is expected to reach $21.8 billion, a 14.6 percent share, in 2019. The mobile social advertising segment is contributing the most to overall spending growth, and national advertisers drive a large portion of the localized share of mobile ad revenue.
Desktop advertising continues to offer value to advertisers relative to many traditional media alternatives, with spending increasing across all online segments including online video. It should reach $20.2 billion, a 13.6 percent share, in 2019. Desktop video and desktop search are driving growth and increasing at a double-digit CAGR.
Local radio’s $14.5 billion, a 9.8 percent share, comes as competition for audiences continues to erode over-the-air (OTA) advertising revenue, however, online efforts by stations are helping to support a slight growth in overall revenue.
“It can be surprising to see that direct mail continues as such an important medium,” adds Fratrik. “However, it directly targets more households than any other channel and mobilizes local consumers to make purchases, especially when combined with campaigns that make use of digital platforms. The key for revenue growth (and protection) today is not just to look at the media in your sector, but across all local media because you compete across all ad channels today.”