1. BIA/Kelsey’s Annual 2015 U.S. Local Media Forecast
September 22, 2014

2. Table of Contents Executive Summary Methodology National Overview
Specific Media Forecasts:
Local Video
Over-the-Air Television
Cable Television
Out-Of-Home
Directories
Online
Mobile
Social

3. About This Forecast
BIA/Kelsey constantly monitors the local media marketplace. Twice annually we build a forecast that brings together these media for a holistic view of the U.S. local advertising picture (definitions are provided).
The slides that follow present an overall assessment of the local media market, including forecasts and explanations, which is followed by a drilldown of various segments (beginning on slide 15).
For more information on the various segments that constitute the overall local media picture, please contact Steve Passwaiter at

4. Executive Summary – Overall Local Media Advertising
Definition
BIA/Kelsey defines the local media advertising marketplace as all media generating revenues by selling access to local audiences to all types of advertisers. “Local” audience advertising sales include buys specifying local and regional markets.
The U.S. economy in the first half of 2014 has shown lackluster growth.
GDP declined in the first quarter but bounced back in in the second quarter.
The employment situation continues to improve but at a very slow pace.
U.S. stocks continues to show gains, indicating a positive outlook towards the future. Local media companies, however, have recently seen share prices fall as the slow GDP growth has led to some advertisers to cut spending.
As a result, we have tempered our advertisement growth projection for We now believe the local ad market will be roughly $137.0 billion in 2014, rather than the $138.0 billion that we originally forecast.
For 2015 we expect a slight increase to $139.3 billion reflecting a slightly stronger U.S. economy.

5. Total Local Media Advertising Growth
will fail to keep pace with growth of the overall economy. It will reach a new low of 0.71% of GDP by 2019.

6. Executive Summary – Overall Local Media Advertising
Based on changes in the overall local media marketplace, we estimate the total local media market will grow at a more moderate level through 2019 (a 3.0% compound annual growth rate). By the total will reach approximately $158.5 billion.
Growth in online/digital advertising revenues will remain strong, with a CAGR of 12.2%.
That compares with a CAGR of -0.5% for traditional advertising revenues.
By 2019 local online/interactive/digital advertising revenues will be $55.0 billion, 34.7% of the total local media advertising revenues.
Bullet # % by 2018?

7. Objectives Our forecast objectives include:
Providing a 360-degree view of the market for “local” advertising — with local defined as some form of targeted messaging to specific geographic markets — spent by national, regional and SMB advertisers.
Offering clients an independent, objective and credible five-year forecast of the market situation.
Giving clients a view into the key drivers and assumptions behind the top-line forecasts.

8. Methodology
BIA/Kelsey gathers as much proprietary and secondary information as available by segment.
We then generate preliminary forecasts by segment, which are discussed with leaders within our key media segments — Yellow Pages, radio, etc.
Our process includes using third-party and public company reports to adjust and fine-tune forecasts.
We tie bottom-up approach with top-down approach.
Our forecast utilizes long-standing industry expertise and knowledge to adjust drivers and key assumptions.

9. National Overview Total U.S. Spending in Local Markets

10. Local Media Five-Year Forecast

11. Local Ad Market Currently Dominated by Traditional Media
*Note: Radio online revenues include online revenue from terrestrial and online streaming services.

12. Steady Shift Toward Digital Media

13. Steady Shift Toward Digital Media

14. Local Ad Market Less Dominated by Traditional Media in 2019
*Note: Radio online revenues include online revenue from terrestrial and online streaming services.

15. Mobile Advertising
Fourth largest local media rising to 11.3% of total local media by 2019

16. Mobile-Specific Forecast Methodology
In addition to interviews and company reports, BIA/Kelsey’s mobile forecast is based on
Usage trends
Mobile ad spending across various formats
Consumer adoption patterns, advertiser penetration
Ad performance measurements such as clickthrough and cost-per-click rates, and other benchmarks in online media.
Data are vetted against aggregate revenues of top players in each mobile advertising segment (i.e., mobile ad networks).
In addition to the targeting component of the ad placement, location specific ad copy or calls to action (i.e., call local store), will also classify a given ad as location targeted in BIA/Kelsey measurements.

17. Mobile Local Ad Spend: Five-Year Forecast

18. Location Targeted Mobile Ad Revenues: Key Takeaways
Defined as advertising targeted based on a user’s location.
It includes large national advertisers and SMBs.
Location specific ad copy or calls to action (i.e., call local store), will also classify a given ad as location targeted.
U.S. location targeted mobile ad revenues are projected to grow from $4.3 billion to $19.3 billion from , a 35 percent CAGR.
Driving this localized share:
Adoption of mobile local advertising tactics (i.e., geo-fencing, click-to-call, click to map) by national advertisers.
National advertisers’ natural evolution to adopt effective, increasingly available, and currently undervalued mobile local ad inventory.
Innovation among ad networks and ad tech providers (e.g., Google’s Enhanced Campaigns, xAd) will provide impetus for this transition.

19. Location Targeted Mobile Ad Revenues: Key Takeaways (cont’d)
SMB adoption – a slow but growing share of localized mobile advertising – will likewise impact revenue.
Evolving SMB savvy and growing propensity to self-serve with offerings like Google AdWords and Facebook (pull); and
Accelerating mobile innovation, sales and bundling efforts of local media companies (push).
Example: Yelp earlier this year partnered with YP, meaning YP’s 4,000 local sales reps will now be armed with Yelp advertising packages, which include mobile presence and distribution.
Increase in localized mobile campaigns that results from the aforementioned advertiser adoption shifts will be coupled with premiums for location-targeted ads.

20. Location Targeted Mobile Ad Revenues: Key Takeaways (cont’d)
Ad premiums referenced in the previous point will result from higher performance for location targeted mobile ads vs. non-location targeted ads.
These performance deltas (such as click through rates) are a function of:
Higher relevance, immediacy and alignment with consumer local buying intent.
All of which are more prevalent in mobile than in other print and digital media.
For example, half of mobile searches have intent to find local information or products, compared to the 17 percent of desktop searches that carry comparative local intent.

21. Local vs. National Ad Spend in Mobile
2015 sums to $18.74

22. Location Targeted vs. Non-Location Targeted Ad Revenues: Key Takeaways
Location targeted mobile advertising is a subset of overall U.S. mobile advertising revenues
The share of the overall mobile ad revenue pie attributed to location based campaigns will grow from 32 percent ($4.3 billion) in 2014 to 43 percent ($17.9 billion) in 2019.
This growth is driven by 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 will drive much of this growth by forcing mobile ads on search advertisers (default campaign) and 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.
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. This shift is already underway.
$19.3 billion should be $17.9 billion – see slide 21
*For a more thorough analysis of Enhanced Campaigns, see our blog analysis

23. Local Share of Mobile Ad Spend by Format
Both sum to 101.1%

24. Mobile Ad Formats: Key Takeaways
We consider various mobile ad formats, including textual search, display, video, SMS and native social advertising.
Because they are bought and sold in different ways, different formulas and models apply to the composition and financial modeling of each mobile ad format.
Search advertising currently holds the largest share, followed by display and native social ads. Search will continue to eclipse all ad formats to hold the largest share.
This is driven by premium ad rates that develop as a function of search’s intent-driven nature. This can be seen so far in Google’s commanding lead in mobile advertising (roughly 50 percent market share).

25. Mobile Ad Formats: Key Takeaways (cont.)
“Native Social” is a notable and fast moving format defined by visual and textual brand messaging that is merged into the organic feed-based interfaces of mobile social apps.
Native social should not be confused with standard display advertising that is placed within social-oriented mobile apps.
Native social ads are conversely defined by their format. It is most often a textual or visual “news-feed” integration into specific social apps that offer this option. The most common examples are Facebook’s News Feed ads and Twitter’s Promoted Tweets.

26. Annual Revenue Changes
Media
2014
2015
2016
2017
2018
2019
CAGR ( )
Location Targeted Mobile
67.4%
54.2%
38.0%
33.0%
24.6%
18.6%
33.1%
Mobile Display
75.2%
54.4%
31.0%
25.1%
17.3%
28.6%
Mobile Search
51.3%
49.1%
32.2%
31.4%
21.7%
16.6%
29.7%
SMS
12.0%
Mobile Video
93.3%
55.2%
38.7%
23.8%
15.0%
10.0%
27.5%
Mobile Social
246.4%
94.3%
80.5%
56.0%
43.7%
27.0%
58.4%
Total Local Adv.
3.1%
1.6%
4.1%
2.3%
4.2%
2.5%
3.0%
GDP
4.0%
4.5%
5.0%
5.3%

27. Directories / Yellow Pages
Majority Digital by 2017

28. Yellow Pages Forecast: Definitions
BIA/Kelsey’s U.S. Yellow Pages forecast is divided into PYP and IYP.
The PYP (print Yellow Pages) bucket represent print Yellow Pages revenue, as well as other revenue that companies would account for as print, including white pages advertising and direct mail.
The IYP category is essentially a catch all for digital revenues. In addition to advertising on Internet Yellow Pages desktop and mobile applications, the IYP bucket includes the following:
Display ad networks
marketing, reputation and presence management
Mobile display ad networks
SEM/SEO
Social media
Websites
Other digital revenue

29. Yellow Pages Forecast: Summary
BIA/Kelsey projects continuing deep declines in printed revenues, partially offset by modest growth in digital. The CAGR for print over the time frame will be percent, reflecting the ongoing shift away from print by consumers and SMBs alike.
On the digital side, we expect steady but modest growth over the forecast period, with a 2.2 percent CAGR for
Digital growth is strongest in areas like mobile and digital services (websites, social media, reputation management), while it is flat or negative in the core IYP product set.
Bundling has helped propel digital growth, while also having a modest positive impact on print revenue.
Digital revenues will surpass print revenues by 2017, and by 2019, digital revenues will account for 63 percent of total revenue.

30. Yellow Pages: Five-Year Forecast

31. Yellow Pages Five-Year Forecast: March 2014 vs. Sept 2014
Should be old March 2014 new Sept 2014

32. Print Yellow Pages Five-Year Forecast: March 2014 vs. Sept 2014

33. Internet Yellow Pages Five-Year Forecast: March 2014 vs. Sept 2014

34. Annual Revenue Changes
Media
2014
2015
2016
2017
2018
2019
CAGR ( )
Yellow Pages
-10.8%
-9.7%
-7.7%
-6.4%
-5.1%
-4.3%
-6.7%
Print YP
-17.4%
-18.1%
-17.6%
-17.2%
-17.3%
-18.4%
-17.7%
IYP
3.6%
5.2%
5.9%
5.1%
Total Local Adv.
3.1%
1.6%
4.1%
2.3%
4.2%
2.5%
3.0%
GDP
4.0%
4.5%
5.0%
5.3%

35. Search and Display continue to grow at steady rates
Local Interactive
Search and Display continue to grow at steady rates

36. Online / Interactive Forecast: Summary
Core search volume from PCs is expected to decrease by -2.8 percent in 2014, as an increasing share of search volume shifts to mobile devices.
In January 2014, Americans for first time used smartphone and tablet apps more than PCs to access the Internet.
Mobile devices accounted for 60 percent of total digital media time spent in May, up from 50 percent a year ago according to comScore.
Local desktop search revenues are expected to grow at a muted 2.6 percent CAGR through Drivers include:
Increasing click-through rates, with CPCs decreasing over the next few years.
The lower CPCs and increased volume of mobile search are pushing down overall CPCs for the online search industry.

37. Online / Interactive Forecast: Summary
Local display will maintain growth at a robust clip through 2019 with a CAGR of 12.7 percent, helped in large part by improving CPMs and engagement with video and social display ads.
With the growth of search and display components, the overall desktop Online/Interactive category will grow at a blended 6.1 percent CAGR through 2019.
which is broken out separately, is expected to grow at a CAGR of 6.3 percent through 2019, driven largely by a growing interest in specialized distribution lists, despite average CPMs staying fairly flat.

38. Local Online / Interactive: Five-Year Forecast
Should these be summed?

39. Local Search

40. Local Display

41. Annual Revenue Changes
Media
2014
2015
2016
2017
2018
2019
CAGR ( )
Local Online / Interactive
6.0%
5.6%
5.8%
6.3%
6.9%
6.1%
Local Desktop Search
0.6%
1.6%
2.1%
2.5%
2.7%
4.0%
2.6%
Local Display
12.7%
13.5%
12.6%
12.5%
Classified, IYP & Vertical Mkts
8.1%
4.7%
5.0%
4.8%
4.9%
5.3%
6.4%
6.5%
Total Local Adv.
3.1%
4.1%
2.3%
4.2%
3.0%
GDP
4.5%

42. Online cutting into share of local over-the-air and cable TV
Local Video Marketplace
Online cutting into share of local over-the-air and cable TV

43. Local Video Advertising Definition
This estimate involves combining the advertising revenues from several media:
Local Television – all of its core over-the-air advertising revenues (excludes digital revenues and retransmission consent fees)
Local Cable – all of its local cable systems’ advertising revenues
Out-of-Home – digital cinema advertising revenues and advertising revenues from out-of-home video delivery (e.g., taxi cab video)
Online – portion of local online revenues that are generated by video advertising by pure-play online companies and online sites of other local media (newspapers, television, radio and directories); also includes mobile video advertising.

44. Local Video Advertising Trends
Local television is expected to show a 7.1 percent increase in 2014 due to strong political advertising and a somewhat growing economy. Political will continue to bolster local television stations in future years with strong gains in both 2016 (10.0 percent) and 2018 (+6.9 percent).
Local cable also is expected to realize strong political advertising revenues in 2014, and as a result will increase 8.4 percent. Future years will also benefit from increased political and audience share gains.
Online video (CAGR percent) will continue to grow strongly and experience noticeable annual growth rates over the next five years.
Out-of-home video continues to grow (CAGR +6.7 percent) – more venues providing access along with continued strength in cinema advertising.
As a result of these changes, local television’s share of local video in 2019 will be 5.9 percent lower than in 2015.

45. Local Video Advertising Revenues

46. 2015 Local Video Advertising Revenues – Distribution Across Media
Decimal?

47. 2019 Local Video Advertising Revenues – Distribution Across Media

48. TV: Five-Year Forecast

49. Local Cable: Five-Year Forecast

50. Out-of-Home: Five-Year Forecast

51. Annual Revenue Changes
Media
2014
2015
2016
2017
2018
2019
CAGR ( )
Online Video
42.0%
34.0%
29.0%
26.5%
24.0%
22.0%
27.0% TV
7.1%
-0.9%
10.0%
-2.0%
6.9%
-0.4%
2.6%
Cable TV
8.4%
-1.2%
8.8%
-1.4%
7.0%
-5.8%
1.3%
Out-of-Home Video
12.1%
11.4%
10.7%
7.3%
0.0%
4.5%
6.7%
Total Local Video
9.6%
2.1%
11.6%
1.7%
8.9%
2.3%
5.2%
Total Local Adv.
3.1%
1.6%
4.1%
4.2%
2.5%
3.0%
GDP
4.0%
5.0%
5.3%

52. Revenues Continue to soar over and above expected levels.
Social Media Advertising
Revenues Continue to soar over and above expected levels.

53. Defining Social Media Advertising
Social media advertising = money spent on advertising formats across social networks.
Social advertising is included in BIA/Kelsey’s display revenue forecast, which falls within the online/interactive advertising category.
BIA/Kelsey’s definition of social advertising does not include revenues derived from the following:
Virtual currency
Social marketing/measurement platforms and services
Social commerce

54. U.S. Total Social Media Advertising: 2014-2019 Forecast

55. Mobile Social Advertising
Most important driver of social advertising – growing at a 30.2% CAGR through 2019

56. U.S. Social Desktop vs. Mobile Ad Spend: 2014-2019 Forecast
CAGRs:
Total Social
CAGR 23.6%
Desktop
CAGR 19.3%
Mobile
CAGR 30.2%
US$ Billions
Note: Numbers are rounded.

57. Social Advertising Forecast: Mobile Continues to Grow Substantially
Driven by Facebook and Twitter, U.S. social mobile ad revenues will grow nearly 4x the 2014 by 2019, reaching $10.3 billion by 2019 – a 30.2 percent CAGR.
Social-mobile advertising will continue to grow as companies have been able to integrate native ads units on the platform (native is already the primary ad unit for top U.S. social networks).
The growth in mobile is especially impressive as there was considerable doubt initially. However, over the past few years, Facebook, Twitter and other networks have generated dramatic mobile revenue growth and that is expected to continue.

58. Social Media Advertising by Company: 2015 & 2019
*YouTube advertising estimates do not include advertising on premium channels.
**Others includes ad revenue from all other U.S. social networks (ex. Pinterest, Tumblr, Foursquare, etc.)

59. Local Social Media Advertising
As social media advertising grows, more will be targeted to local audiences.

60. U.S. Social Local vs. National Ad Spend: 2014-2019 Forecast
$23.6
$21.3
Local CAGR: 29.3%
$18.1
$14.7
US$ Billions
$11.2
$8.2
Note: Numbers are rounded.

61. Social Media Advertising: Annual Revenue Changes
2013
2014
2015
2016
2017
2018
CAGR
Social Media
54.0%
36.8%
31.5%
23.3%
17.5%
10.7%
23.6%
Desktop
43.6%
30.3%
18.5%
14.7%
10.4%
19.3%
Mobile
77.4%
48.9%
44.1%
29.9%
21.0%
11.1%
30.2%
Local
77.6%
48.2%
39.6%
28.7%
20.7%
13.7%
29.6%
Total Local Adv.
3.1%
1.6%
4.1%
2.3%
4.2%
2.5%
3.0%
GDP
4.0%
4.5%
5.0%
5.3%

62. Mark R. Fratrik, Ph. D. Sr. VP, Chief Economist mfratrik@biakelsey
Mark R. Fratrik, Ph.D. Sr. VP, Chief Economist (703)