How Much Is ‘Local Search’ Really Worth?

Journalists and financial analysts keep asking the question, “When will local search finally take off?” By that they mean ad spending. After all, locally targeted advertising in traditional media such as newspapers, yellow pages, radio, outdoor, direct mail, spot cable/TV and coupons easily exceeds $100 billion annually in the U.S. And consumers have already embraced local search—or at least the search for local information online.

So the conventional wisdom goes: the dollars will follow the eyeballs. Well yes and no, as I’ll try and explain below. But first, for this inaugural column on local, we thought it would be interesting and informative to round up the various local online advertising forecasts and offer some perspective on what the “local search market” may be worth today and several years from now.

Because of differing definitions (and methodologies), it’s hard to make “apples to apples” comparisons among the various estimates. But here are the major local Internet ad spending forecasts today:

The Kelsey Group

The Kelsey Group forecast consists of Internet yellow pages (IYP), geotargeted paid-search advertising and local mobile ads (still tiny). Last year online classified advertising was included in the forecast, which appears to have been excluded this year. Wireless is also de-emphasized in the current forecast.

Global forecast:

2006: $4.1 billion 2011: $11.1 billion

The previous Kelsey forecast put U.S. local search revenues (as defined above) at $1 billion in 2005.

(Disclosure: I was Kelsey Group analyst until April, 2006.)

Borrell Associates

Borrell casts a broader net in its definition of “local online advertising.” As a consequence its numbers are larger. Included in the definition are geotargeted display ads and classifieds, local paid search, local video and locally targeted email advertising.

U.S. forecast:

2007: $7.7 billion 2010: $9.3 billion

Jupiter Research

Jupiter, which has historically taken a contrarian position and been bearish about “local search,” similarly defines a relatively broad category for “local online advertising.” While not quite as broad as Borrell, Jupiter includes paid search, locally targeted display advertising and classifieds. Jupiter believes that classifieds will dominate (61%) local spending through the forecast period and estimates geotargeted paid search advertising will reach $2.1 billion by 2011.

U.S. forecast:

2006: $4.3 billion 2011: $8 billion ($2.1 billion attributable to local paid search)


The data aggregator has in the past couple of years started generating its own online ad forecasts. The company doesn’t explicitly define what segments comprise its “local online advertising” category but it appears to generally mirror the Borrell definition. Local paid search is broken out as a subset of the larger local category. However, notwithstanding its apparently broad definition of local, eMarketer’s projections are more conservative than any of the other firms.

U.S. forecast:

2006: $1.3 billion ($800 million attributable to local paid search) 2010: $4.9 billion ($2.7 billion attributable to local paid search)

Piper Jaffray

Following the most conservative of the local forecasts is the most bullish. In a recently released 425 page report entitled “The User Revolution: The New Advertising Ecosystem and the Rise of the Internet As a Mass Medium,” Piper has aggressively embraced local search.

Piper estimates local online advertising, here defined as local search, IYP and classifieds, to be worth $4.589 billion today. The firm contends the medium-term local market potential is $25.9 billion. Piper also believes that local can eventually represent 50% of all search volume, assuming improvements in data quality as well as several other upgrades and innovations.

U.S. forecast:

2006: $4.589 ($989 million attributable to local paid search) Market potential: $25.9 billion

Drivers and Barriers to Growth

Having seen all those numbers it remains difficult to predict exactly how fast the market will grow. There are numerous variables and potential developments that could moderate or accelerate the growth and “migration” of locally targeted ad dollars to the Internet. Indeed, the “local Internet” is evolving rapidly. But it is also highly fragmented and arguably getting more so all the time as new consumer sites launch at a regular pace—each one to be supported by geotargeted and typically small businesses ad dollars. But scaling and cost-effectively acquiring those small business advertisers is a tremendous challenge.

Several high profile local consumer sites have changed course or bailed out recently in recognition of these challenges. Yet behind the scenes an entire ecosystem is emerging to simplify online marketing and make it more accessible for local businesses. (National businesses have agencies to do their media buying and face different challenges.) Yellow pages publishers, newspapers, web hosts, a few verticals and others now sell SEM and SEO clicks (and calls to a lesser degree) to local businesses.

Without going down the rabbit hole of a thousand-word digression, let’s say that within a year or two it will be relatively straightforward for any small business in the U.S. and perhaps abroad to buy geotargted ads online. That said, getting their attention will remain something of a challenge and self-service is unlikely to draw more than a reasonable minority of the addressable small business market.

That, of course, raises the question: What is the addressable market?

According to directory industry sources there are 3.2 million print yellow pages “advertisers” in the U.S. today generating just under $15 billion in annual revenues. (Advertisers is in quotes because the definition is somewhat elastic; the actual number is probably fewer.) The U.S. SBA says there are more than 25 million “small businesses” in America, defined as 499 or fewer employees. However a more reasonable figure, and addressable market estimate, is between 10 and 15 million small businesses.

Yet if 3.2 million U.S. small businesses each spent $1000 per month online, the cumulative total value of that spend would be $38.4 billion annually. However this scenario wildly exceeds even the most optimistic revenue projections for local online advertising. And that doesn’t include national advertisers (e.g., brands, retailers) targeting local consumers.

Clearly, on paper, the local market has enormous revenue potential; that’s the tantalizing part for everyone involved. But the complexity of local “on the ground” far exceeds that of national online advertising or general paid search—which is where the adventure begins.

Related Topics: Channel: Local | Local Search Column | Search Engines: Maps & Local Search Engines | Stats: General


About The Author: is a Contributing Editor at Search Engine Land. He writes a personal blog Screenwerk, about SoLoMo issues and connecting the dots between online and offline. He also posts at Internet2Go, which is focused on the mobile Internet. Follow him @gsterling.

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  • Eric Holter

    Great post Greg. I’m glad Search Engine Land has started a column for local search dialog. I think one barrier to local search taking off is the ignorance of local shops and services to the existence of local online advertising opportunities on search engines. One of the best channels for educating local shops and services is through small- to mid-sized advertising agencies and design firms–the ones such small local businesses turn to for other marketing materials. Sadly, the typical small advertising agency or design firm is not paying careful enough attention to such changes/opportunities. I’m sure your column will be helpful in this regard. Thanks!

    Eric Holter
    CEO – Newfangled Web Factory


  • Joe Duck

    Excellent analysis Greg. the complexity of local “on the ground” far exceeds that of national online advertising

    Right on, and although $1000 per month sounds modest to many even that amount would drop jaws at many small businesses who run a few local spots a few times per year. Few even understand, for example, why a blog for their business would probably create a lot of free online activity.

    We are years from a rational local adoption of online marketing strategies.

  • Cohn

    Nice overview Greg.

    Does the yellow pages industry count “line listings” as advertisers?

    $15 Billion divided by 3.2 million yellow page advertisers is $4,687.50 spent annually or $390.62 a month per advertiser.

    Sounds like a lot of wasted advertising dollars.

    Won’t the market for local search grow only when the average search query has doubled its present length of 2.1 words?

  • MikeM

    Great post Greg, I am anxious to read the “thousand-word digression”.

    Advertising online for local business is like looking at ripe fruit on trees but the road into the orchard is muddy and inaccessible. They don’t know how to get in.

    You mention the fragmentation in the local space, it’s complicated even for specialists as you know.
    Local search specialists are few and far between as most SEMs are rightly chasing National accounts.
    A void exists here that will be filled in time but I think we are still a couple of years away if not more.
    SEMs moving into the local space will have to put feet on the ground and be prepared to educate and hand hold. What should be easy is actually very challenging.

    $1,000 a month can buy a whole lot of local search real estate.

  • zkatkin

    I agree with Joe Duck. We are very far from local adoption. The local market, typically implies small business. As a web design company owner I deal with small businesses that have had modest local success for decades with little or no (ugly, modest) web presence.

  • Richard Hargrave

    Gregg, as always you’ve got a real handle on the business of local search – and congratulations to Search Engine Land! You’ve brought some clarity to the ongoing analysis and interpretation of the multiple stats and projections out there.

    To address some of the comments, above: 1)I don’t believe any YP publishers count “listings” as advertisers – they do however count any paid unit, including semi-bold, bold and additional listings. 2)Local SMEs investing $1,000/mo. is actually somewhat conservative (in many tier 1 markets), and represents a good start to maximizing ROI. 3)We are currently witnessing the adoption of local SEM services in NYC, and I suspect that there are at least a half-dozen other markets in the same position. Embrace the opportunity, educate the marketplace and you’ll capture the dollars…

    Rich Hargrave

  • Scott Salwolke

    I agree that its about time to focus on local search. Yet, to say it’s mostly about small business is too limiting. After all, don’t hotel chains or realtors, for example want to rank highly for local terms.

  • Art

    We have recently partnered with a local ad agency and now offer both “Local Search” on and “National Search” using We are finding that giving them a complete online platform with exposure on the top level search sites and on the local search site has help them to understand online advertering and open up there minds to the possibilities. Once they see the traffic and the results we are seeing them go from $200 and $500 per month to $500 to $1500.

  • Martin Garcia

    Thank you Chris for creating this new column it’s a breath of fresh air, coming from one of the two authors of “The Invisible Web.” I’m looking forward to reading “Locals Only” every Monday.

    Martin Garcia
    Founder – Pinpoint Pages®
    local websites

  • The Little Guy

    Greg, Since this is my first comment on your site, I will keep it short.

    Yes, there are some major barriers with local search. Since we have been building a solution since 1997, I am bias about our patented solution due for launch June 15th.

    Our site, less the new branding graphics, has a “Take the Tour” video that explains our system well.

    I would love to hear your feedback, since I have paid attention to your expertise in search since the late 90′s.

    Best Regards,


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