BIA/Kelsey’s U.S. Local Advertising Forecast 2018 projects total local advertising revenue in the U.S. will reach $151.2 billion in 2018, up from $140.9 billion this year, representing a growth rate of 5.2 percent. Traditional media will comprise 64.7 percent of the revenue, with online/digital securing 35.3 percent. BIA/Kelsey defines local advertising as all advertising platforms that provide access to local audiences for national, regional and local marketers.
“The strong economy and the expectation of highly-competitive statewide political races next year reinforce our outlook that local advertising revenue will show strong growth in 2018, in fact, higher than we’ve seen for five years,” said Mark Fratrik, Chief Economist/SVP at BIA/Kelsey. “Combine these factors with the continued strength of traditional and online media and the revenue landscape for next year looks robust.”
Looking specifically at radio, BIA/Kelsey reports in 2017 the industry’s revenue added up to $15.5 billion ($1.3b online and $14.1 OTA). In 2018 it projects $15.7 billion ($1.5b online and $14.2b OTA). And looking down the road to 2022, radio’s local ad revenue will reach $16.7 billion ($2.1b online and $14.6 OTA). This would make up 8.4 percent (OTA) and 1.2 percent (online) of U.S. local advertising, respectively.
- 2017 was a year of basically no growth in radio over-the-air advertising, with future years also only showing small increases of less than 1 percent annually.
- Increased streaming audio competitors and increased competitors for advertisers has basically kept the over-the-air advertising stagnant, with online efforts by stations continuing to help support a slight overall revenue growth.
- Many radio groups are continuing their efforts in online activities which bolster the overall revenue of these stations, as station operators recognize that future revenue growth must come from these sources.
- Biggest ad increase in 2018 across U.S. will be southeast – 1.1 percent
Overall key findings from the forecast include:
- Direct mail preserves its lead position with a 25.4 percent ($38.5 billion) slice of the local advertising pie. High response rates of around three to five percent, and a return on investment comparable to some digital media, combine to make DM appealing to advertisers.
- Local television continues as second media at 13.8 percent ($20.8 billion). It will continue to be the largest player (more than 60 percent) in the local video advertising market. Revenue growth within the total local video advertising segment will come from local mobile video (growing to more than $1 billion) and local online video (increasing to more than $2 billion).
- Mobile will move into the third position, representing 12.6 percent of local advertising spend in 2018. This category will grow to 19.2 percent by 2022. Adoption of mobile local advertising tactics (e.g., geo-fencing, click-to-call and click-to-map) continues to grow among national advertisers that tend to gravitate toward effective, increasingly available and currently undervalued mobile local ad inventory.
The forecast also projects significant ad spending in native social advertising next year due to its ability to target and reach local consumers. Social media ad revenues from mobile (not including tablets) now represent about 71 percent of total social ad spending and will grow to nearly 80 percent by 2022 as more of the user activity shifts away from desktops.
“Social channels such as Snapchat and Instagram have evolved their mobile native ad models to include new targeting and reporting features,” Fratrik said. “As mobile and social local channels continue to deliver high performance results for advertisers, advertising dollars will flow to these areas. Indeed, pushed by increased consumer use, agencies will budget more of their spending into locally activated mobile products and services.”