It’s that time of year again; BIA/Kelsey’s spring release of its local media forecast. This is broken down into its media components, such as Online, TV, Yellow Pages, Mobile, etc… The full forecast will be out in a few weeks. Today we release the first component: Mobile.

Part of the Executive Summary and charts are below. The top-line takeaway is overall U.S. mobile ad revenue growth: $7.2 billion last year to $30.3 billion by 2018. That includes search, display, SMS, video and native social (i.e. FB news feed ads). The latter caused us to dial figures up from last year.

Zeroing in on the forecast’s main theme of location targeted mobile ads, those went from $2.9 billion last year to $15.7 billion in 2018. That makes them 40 percent of overall mobile ad revenues, growing to 52 percent in 2018. There are lots of reasons for that, some of which are outlined below.

Lastly, it’s notable that this forecast release coincides with today’s IAB release of prior year online and mobile audits. It’s good to see accuracy in their figures, especially the mobile numbers which I believe due to parity with the figures I devised. Their $7.1B is just shy of our $7.2B.

To engage over these numbers or for a full copy of the forecast, email my colleague Steve Passwaiter. And we’ll be discussing these figures in greater depth during our Leading in Local conference next month in Atlanta. Email me directly for a discount code at mbolandATbiakelsey.com.

Executive Summary

— Location targeted mobile advertising — the centerpiece of this forecast — is included within total U.S. mobile advertising (see slide 22 for this breakdown).

— To understand the localized portion requires first panning back to the total mobile ad revenue picture. Here, BIA/Kelsey projects revenue to grow from $7.2 billion in 2013 to $30.3 billion in 2018. This projection has increased from our previous forecast (November 2013).

— Increased projections result from guidance from mobile ad networks and ad share leaders such as Google (33 percent of paid clicks now come from mobile devices); and Facebook (53 percent of ad revenues attributed to mobile, up from 23 percent last March).

— Google’s Enhanced Campaigns*, launched in July, will compound these factors by forcing mobile ads on search advertisers (default campaign inclusion). This will accelerate a mobile advertising learning curve and adoption cycle for all search advertisers, including SMBs.

— Enhanced Campaigns will also notably close the current gap between mobile ad rates and desktop equivalents (rates are demand-driven).

— This will play out as an influx of advertisers in Google’s bid marketplace for mobile keywords will naturally boost bid pressure and thus CPCs. There is shift is already underway, evidenced by data shared with us by search marketing agencies.

— The share of the overall mobile ad revenue pie attributed to location based campaigns will grow from 40 percent ($2.9 billion) in 2013 to 52 percent ($15.7 billion) in 2018.

— This share shift remained fairly consistent from our previous forecast, as the factors driving localized mobile ad adoption have remained steady.

— These factors include advertiser demand, higher ad performance for location targeted ad campaigns, and resulting increases in mobile ad rates (CPMs, CPCs).

— Other important factors driving this localized share include the adoption of mobile local advertising tactics (i.e. geo-fencing, click-to-call, click to map) by national advertisers, who account for most U.S. mobile ad spending.

— SMB adoption — a slow but growing share of localized mobile advertising — will likewise impact its growth.

— For national brand advertisers, the shift to location targeted mobile advertising will be driven by their natural evolution to adopt effective, increasingly available, and currently undervalued mobile local ad inventory.

— Innovation among ad networks and ad tech providers (e.g., Enhanced Campaigns) will provide additional incentive and impetus for this transition.

— For SMBs, the sector’s digital media adoption traditionally lags behind national advertisers due to lower levels of tech savvy, budget, time and human resources.

— However, SMB-driven growth is expected throughout our forecast period due to evolving SMB savvy and growing propensity to self-serve with offerings like Google AdWords and Facebook (pull).

— Also at play will be the accelerating mobile innovation, sales and bundling efforts of local media companies (push).

— As an example of the push paradigm, Yelp last month partnered with YP. The publisher’s 4,000 local sales reps will now be armed with Yelp advertising packages, which include mobile presence and distribution.

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BIA/Kelsey defines that local media marketplace as all local media/services that provide access to local audiences. In other words, it includes all of the media that local radio stations compete against for national and local advertising spending in their markets. The total spending for all of that media for 2013 is estimated at $132.7 billion according to BIA/Kelsey. BIA/Kelsey is forecasting that local radio stations will receive 11.5% of all advertising revenue spent in local markets in 2013, placing it fourth behind direct mail (27.2%), newspapers (16.1%) and television (14.9%).

Advertisers who do use radio as part of their advertising mix are generally quite pleased with the results they get from that advertising. In BIA/Kelsey’s annual Local Commerce Monitor (LCM) survey on advertising and marketing of small and medium businesses (SMBs), we ask several questions on the satisfaction of the various advertising and marketing choices made. For the group of businesses who do advertise on radio, 36% rated the perceived ROI of radio advertising as either excellent (10-19 times return on that investment) or extraordinary (over 20 times the return).

The radio industry is facing ever increasing competition from new and innovative digital media outlets that are available to local and national advertisers. At the same time, listeners have alternate ways to receive their audio entertainment programming, news and information — satellite radio, internet radio sites, iPods and MP3 players to name a few. While the audiences attracted to local radio stations are getting smaller, annual revenues are still increasing, albeit at rates much lower than historical averages.

BIA/Kelsey’s State of the Industry report also looks at which format categories have increased their revenue share over the past 12 years and which have seen declining revenue shares. Spanish language stations have seen the largest jump in revenue share in 2012, more than doubling their 2000 share as the Spanish population has continued to grow and advertisers are seeing the value in reaching this audience. Sports, which appeals to the popular Men 18-34 demographic, saw the next largest increase. Adult Contemporary (AC) stations not only had the highest revenue share in both 2000 and 2012, it saw the third largest increase. So who were the biggest losers among format categories from 2000 to 2012? Easy Listening saw its revenue share plummet from 4.3% in 2000 to 0.2% in 2012, losing more than 95% of its revenue share. Other hard hit format categories were Talk and AOR/Classic Rock.

BIA/Kelsey’s State of the Industry report describes the local radio station industry that finds itself in this incredibly complex and competitive marketplace — audience levels, revenues, technology advancements, new competition.

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BIA/Kelsey examines these differences this week in a new “Spotlight” report using data from the recently completed Wave 17 of the Local Commerce Monitor (LCM). The report is the latest in the ongoing “Spotlight” series that drills down into the LCM data to examine how SMB advertisers acquire and retain customers.

LCM is BIA/Kelsey’s long-running study of how U.S. SMB advertisers are evolving their use of media to acquire and retain customers.

Local mobile advertising is more than a blip on the radar today, and it is expected to grow substantially over the next few years. Projected mobile local advertising revenues represent a subset of total U.S. mobile ad spending, which BIA/Kelsey forecasts to grow from $3.25 billion in 2012 to $16.8 billion in 2017. This puts locally targeted mobile ads at 38% of overall U.S. mobile advertising spending in 2012, growing to 54% in 2017.

The LCM Wave 17 data shows that SMBs that participate in mobile advertising differ from those that do not use mobile advertising in several important ways:

* SMB mobile advertisers have much more aggressive plans for advertising media spending over the next 12 months compared to those who don’t. These SMBs that leverage mobile advertising spent $56,964 in their annual media spend in the last year, more than double those that do not use mobile advertising.

* In the past 12 months, SMB mobile advertisers on average spent 37% more on their budget for digital and online compared to their non-mobile counterparts (28%).

* SMB mobile advertisers advertising are highly engaged with their customers. They tend to use check-in data to understand behavior and monitor basic information related to consumers at a far higher rate than non-mobile SMBs.

* SMB mobile advertisers care very much about their online sentiment; 80% of them perform some sort of monitoring of online properties compared to only 60% of the full sample.

Interested in learning more about LCM Wave 17 or getting a custom cut for your business? Contact Celine Matthiessen at cmatthiessen@biakelsey.com.

We’ll be covering this and other themes in great depth at our upcoming Leading in Local conference, December 10-12 in San Francisco. Be there and join the conversation!

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This morning at SMB Digital Marketing, BIA/Kelsey Chief Economist Mark Fratrik and VP of Business Development Steve Passwaiter walked through a view of the U.S. local media marketplace, and offered a sample of BIA/Kelsey’s Media Ad View Plus, a data product that allows local sellers to see how advertisers allocate their spend in local markets.

Fratrik offered a quick overview of the U.S. local advertising market. In 2013, local advertising will have a slight increase, just 0.2%, due to a sluggish economy, plus no political advertising following $3 billion in political ads in the 2012 election cycle. In general, local advertising is not keeping pace with overall economy.

The movement toward digital is ongoing, and also one reason for slugging advertising growth. Digital is less expensive, more price effective, which means advertisers are less likely to increase their overall ad spend. The movement toward non-advertising marketing solutions may also be contributing to the sluggishness, Fratrik said.

By 2017, the local ad market will reach $148.8 billion, about $41 billion of which will be online/interactive. Newspapers are still an important player in the local media marketplace. However, online/interactive and particularly mobile will be the growth drivers of local media. Mobile for example, will grow from less than 2 percent in 2012 to more than 6 percent in 2017.

Media Ad View Plus takes BIA/Kelsey’s forecast down to the local and vertical level. MAV looks at local markets five years forward, and answers questions like, “How much do auto dealers in Austin, TX, spend on video display advertising?” [See the chart below for the answer.]

“This allows you to see, where should you play offense, where should you play defense? MAV helps you make more informed decisions,” Passwaiter said. “How effective are you? Where are you over- or under-achieving? Having this helps you separate yourself from all the others in the marketplace who are just trying to sell something.”

Passwaiter noted that MAV is available at a reduced rate of $1295 per market, good until Sept. 27.

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Television dominated the Government/Political/Religion (“GPR”) vertical in 2012, according to BIA/Kelsey’s Media Ad View Plus. In 2012, television’s $3.1 billion of advertising from GPR represented nearly 3/4 of total advertising for this vertical.

2012 Government/Political/Religion Ad Spending by Media

The $3.1 billion of GPR advertising represented 15% of the television media’s total ad spend in 2012, with the vast majority of it coming in the Fall (September to November), based on information from the Television Bureau of Advertising (TVB). TVB has studied the spending patterns in the political category for the past several election cycles. The vast majority of political spending occurs in the Fall (September to November), with the exception of primaries, which provide some advertising revenue from January to September, at least in markets within battleground states. “Clearly local TV’s role as the campaign media workhorse has not changed” states the TVB about the 2012 election season.

GPR advertising is cyclical, peaking during big national and local elections, which occur during even years. The more hotly contested the elections are, the better for local television stations. In 2017, an odd year with no major political elections, the GPR advertising landscape is vastly different, with only 19% of GPR advertising revenue going to television. More GPR advertising revenue will be going to direct mail than television in 2017, according to Media Ad View Plus. In odd years, such as 2017, GPR is dominated by smaller local elections, which rely more on direct mail to get their message to voters in their districts rather than advertise to entire television markets.

2017 Government/Political/Religion Ad Spending by Media

The bounty that can be GPR revenue during the even years is not equal across the 210 Nielsen television markets. Markets located in battleground states will see greater GPR advertising spend than markets in states that are heavily red or blue. States such as Ohio, Virginia and Florida have become predictable battlegrounds states. These so called “purple” states see boosts during even years, with the Presidential, Senate and House races.

More information on BIA/Kelsey’s Media Ad View Plus is available here.

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In 2012, television dominated both the Automotive advertising and Government/Political/Religion (“GPR”) verticals, according to BIA/Kelsey’s Media Ad View Plus. More on the GPR vertical later.

Television’s $4.6 billion share of automotive advertising represented 28.4% of total automotive advertising in 2012. This $4.6 billion represents 22% of television’s total advertising revenue in 2012, making it the highest spending vertical for television.

2012 Automotive Ad Spending by Media

Media Ad View Plus’s automotive vertical includes five subcategories: automobile dealers and automotive manufacturers, other motor vehicle dealers, automotive parts and accessories stores, tire dealers, and gasoline stations and automotive repair. Of these, automotive dealers and automotive manufacturers were the predominant advertiser category, accounting for more than $3.8 billion of the total automotive advertising $4.6 billion spent on television.

“If it’s got a screen, automakers want to advertise on it,” said Ad Age in a recent article, Automakers Like Video, But Still Pour Gas On TV For Big Product Launches. While the automakers on Ad Age’s 100 Leading National Advertisers list have been increasing their digital advertising, “they’re also showing enduring faith in the American couch potato, with spending on television increasing from 2011 to 2012. Ad Age attributes the continued popularity of television to the automotive vertical to major product launches. The top five spending automakers, according to Ad Age, are General Motors, Ford, Toyota, Fiat (Chrysler Group) and Honda.

In 2017, television’s share of automotive advertising is expected to increase to 32%, while the shares going to other traditional media such as newspaper and direct mail are expected to decline significantly. Newer media, such as online and mobile, are also expected to increase their share of the automotive pie. Part of this increase can be attributed to the significantly lower GPR revenues expected to be spent on television in 2017. Without GPR dominating television commercials in 2017, as happened in 2012, there will be more inventory available for the other verticals, such as automotive.

More information on Media Ad View Plus is available here.

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According to BIA/Kelsey’s Media Ad View Plus more than 43 percent, or $10.7 billion, of retail advertising dollars went to direct mail in 2012. That $10.7 billion represents 30 percent of direct mail’s total ad spending. Furthermore, BIA/Kelsey doesn’t expect that to change much by 2017, where retail is still projected to spend 43 percent, or $12.3 million, on direct mail.

2012 Retail Ad Spending by Media

So what types of retailers are spending money on direct mail? The largest spending retail specialty is warehouse clubs and supercenters, with $2.35 billion in spending on direct mail in 2012. This is more than double its closest competitor, discount department stores, which spent $1.1 billion.

What attracts retailers to direct mail over other media? According to direct mail companies, unlike ads on radio, television and newspapers, which go out to everyone in the market, direct mail can be targeted to a particular location or demographic, providing a better ROI. This could be valuable to brick-and-mortar retailers with fixed locations. Not everyone subscribes to a newspaper, watches TV, listens to the radio, or owns a computer or smartphone, but everyone gets mail.

The National Federation of Independent Business (NFIB) says that direct mail is an old-school marketing method that still works for small businesses. “Direct mail can be an effective part of any marketing campaign. Yes, email, Facebook and even Twitter work for some small businesses, but that doesn’t mean tried and true methods like direct mail should go by the wayside.”

According to BIA/Kelsey’s Media Ad View Plus, overall direct mail accounted for nearly $35.8 billion out of a total $132.2 billion in U.S. advertising dollars. That’s a whopping 27.1 percent of total advertising dollars, making it by far the largest media category. Newspapers, the next largest medium, accounted for 17.1 percent of total advertising dollars in 2012, followed by television in third place with 15.7 percent.

BIA/Kelsey expects this to change somewhat by 2017, with direct mail still on top with 25.1 percent of total advertising dollars, followed by television with 15.1 percent, with newspapers falling to third with 11.9 percent.

More information on Media Ad View Plus is available here.

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The title of this event represents a bit of a change for us. BIA/Kelsey has always focused attention on the local SMB community. That business group continues to represent a significant revenue opportunity for those in local media.

We’ve observed a shift. National brands are now quite interested in using local interactive media platforms as they seek to grow sales. The large national brands do see a distinct benefit of “localizing” their messaging and marketing.

The question for local media brands is simple: are you in a position to offer these national brands the assistance they need?

Marketers on a national level are increasingly aware of the dangers of watching millions of dollars in brand/product messaging get lost or become ineffective because of poor execution at the local level. Store managers and franchisees can be forgiven for allowing these subtleties to pass them by but that doesn’t hold true for the corporate marketing department that gets stuck living with these mistakes.

If you are in any way related to the development of revenue in your company and you’d like to learn more about what national brands are doing to localize, you need to join us in Boston next week. Visit our website (www.biakelsey.com/LeadinginLocalBoston) to learn more and take a look at our agenda.

Hope to see you there.

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