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$5.3 Billion Local Search Advertising Market Will Be Led By Companies That Invest In Scalable Technology And More Efficient Business Models

Locally placed search advertising in the U.S. is projected to grow 30 percent over the next five years, from $4.1 billion in 2008 to $5.3 billion in 2013. According to new research by Borrell Associates, this growth will be led primarily by advertising service providers that adopt scalable technology infrastructure and recalibrate their economics to allocate more customer investment to search media spend.

According to the report, many online advertising resellers and affiliates, who service local businesses, churn half their customers within a year’s time, and some lose as many as 90 percent. This often is due to missed expectations and a lack of return on investment for local-business customers. Critical points for local advertising success include correctly pricing advertising products for local businesses, and devoting a greater percent of that investment to media spend. Most important, advertising products and value must be easily understood by local businesses. That requires a shift from selling Web site clicks to selling measurable leads, delivered via email and phone calls.

These are among the key findings in a new Borrell Associates report, “The Economics Of Search Marketing: Addressing the Challenges of a Scalable Local Online Advertising Model,” commissioned by Clickable. The intent of the report is to shed light on opportunities in the search engine-engine marketing (SEM) marketplace in an effort to strengthen the performance of search advertising for small and local businesses. This report is available for free at Clickable.com.

According to the report, affiliates and resellers of search advertising who do not invest in sophisticated technologies will continue to see high levels of customer attrition. In response, new affiliates and resellers who optimize and scale SEM advertising performance through simple software tools and reporting – that clearly communicate and deliver value – will be poised to capture a larger share of the local advertising marketplace.

“The question is, can the local online advertising market’s rapid growth continue under a current sales model that either delivers little to no profits or, more likely, requires companies to peel dollars away from advertisers’ total media spend in order to profit?” said Gordon Borrell, CEO of Borrell Associates and author of the report. “A scalable online advertising business requires an investment in a sophisticated SEM management platform that drives efficiency and effectiveness, while earmarking appropriate levels of spending toward keyword media buys.”

Despite near-term challenges, the horizon for local search advertising is promising, with spending on paid search by local advertisers forecasted to rise 30 percent, representing average annual increases of $242 million. The most successful local search advertising service companies will not only manage expectations through simple reporting and greater ROI, but by migrating customers to higher average monthly media spends.

The Report Contains

  • An overview of the search-advertising marketplace, which rose to $11.5 billion last year and is slated for continued growth as other media channels decline.
  • A review of the key companies in local online advertising, from local advertisers, to search-engines like Google, search-advertising affiliates and resellers, and technology platform providers.
  • An examination of key data that drive local advertising, including affiliate arrangements, customer churn, profitability, dollars devoted to actual keyword buys versus profit margins, and monthly advertiser spending levels.

About Clickable

Clickable is a platform that makes online advertising simple, instant and profitable. It empowers beginners through professionals to maximize their advertising investment – from the first dollar to the millionth and beyond. Clickable makes you more efficient, effective and confident. That’s why customers often say: “Clickable is like having a trusted advisor always by your side ensuring success.” To learn more, visit www.clickable.com.

About Borrell Associates Inc.

Borrell Associates is a research and consulting firm that tracks local ad spending, for any market, across all 11 forms of media (online, newspapers, direct mail, cable, radio, etc.) and helps media companies develop executive strategies for their online initiatives. It produces industry-related reports, offers revenue benchmarking, gives presentations to companies and trade associations, conducts online-sales training and Webinars, and provides executive-level consulting services. For more information visit www.BorrellAssociates.com.

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