Borrell Associates—which earlier this year provided a very bearish outlook for growth in the local online ad market—has changed its mind. The research firm now expects the market to grow by 11 percent, up from its initial projection of 8 percent in January. That means the market should reach $14.03 billion this year, up from $12.9 billion in 2008—but the jump is likely to be even bigger than that. Says CEO Gordon Borrell in a blog post: “We take a lot of pride in our projections, which have been on target year after year. But we may have been far too conservative earlier this year when we projected that local online advertising would grow 8% in 2009. At the end of the first quarter, the increase looked closer to 11%. When we finish collecting our second-quarter data in the next few weeks, Im certain the number will be quite a bit higher.”
He says none of the factors that Borrell thought would cut into sales in 2009—including small businesses pulling all their online spending and high churn rates—have been as prevalent as the firm believed. “Phenomenal as it may seem, were getting data indicating triple-digit growth for some companies selling interactive advertising,” he says. In a comment on the Screenwerk blog, he adds that “wild enthusiasm over fantastic results” is not driving the new spending. Instead, he attributes it to “market pressure,” noting that small advertisers are receiving lots of sales pitches. Certainly, the growth rate will still be down, considering that the market jumped by 47 percent in 2008. Still, the continued relative strength in the local online ad market likely explains why major internet companies including AOL (NYSE: TWX) and MySpace are doubling down with new local efforts.
By Joseph Tartakoff