Forecast: Local Ad Revenue to Increase 5.2 Percent in 2018

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 and 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.”

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 calls for over the air radio to grab $14.2 billion in local ad spend, up a tick from $14.1 billion this year. But radio’s digital assets will accelerate faster, growing from $1.3 billion in 2017 to $1.5 billion in 2018. All in, radio will rake in $15.7 billion in 2018, placing it fourth in a field of 10 media channels with 10.4% of ad dollars, ahead of newspapers ($15.4 billion or 10.2%).

Looking ahead to 2022, radio will book $2.1 billion in online business (1.2% of local ad dollars) and $14.6 billion from over the air (8.4%) for a total of $16.7 billion.

Rewinding 2017, Fratrik says it was a year of “basically no growth in radio over-the-air advertising.” Future years will bring “small increases” of less than 1% annually, he adds. “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,” Fratrik says.

Radio’s digital future looks brighter. “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,” Fratrik says. Radio’s biggest ad revenue increase next year will occur in the Southeast, which is on track to grow 1.1%.

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.

Mark Fratrick

“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.”

BIA/Kelsey’s 2018 U.S. Local Advertising Forecast is a five-year prediction that includes a national overview of total locally activated U.S. ad spending and individual analysis and forecasts for the following media: direct mail, local video (including local over-the-air television, local cable television, out-of-home video, mobile video), Out-of-Home (OOH), Online, Radio, Social (including breakouts for desktop/tablet and mobile social), mobile (including breakouts for location and non-location targeted mobile media), Directories, Newspapers and Magazines.