Local Canadian Online Ad Spend

Last May 7th, Borrell Associates presented via webinar a local ad-spending forecast for Canada which covered all media including online.

Ad spend is fairly simple to track at the national level where we usually take a top down approach. The few major players in any given media are surveyed or audited which gives you an accurate picture of how much is being spent in total.

While there are a few larger players in local media, to gage market specific ad spend for local advertising you need to approach it bottom up. This means regularly surveying individual businesses in each market to gage how much they plan to spend when and in which media.

Borrell Associates suggests Canadian local advertisers, being very late in entering the online advertising game are actually numerous in skipping this step and going straight to mobile advertising. In a sense, Canadian local advertisers are spending much less than American local advertisers (comparatively speaking) specifically online, but much more in mobile advertising.

BA values “local” ad spend around $9.2 billion for 2011. For comparison, eMarketer estimates total (local and national) ad spend in Canada around $11.9 billion in 2011. These two estimates place local at first glance at 65,7% of total advertising expenditures in Canada in 2011.

However, when you look a little deeper at what’s included or not in both estimates, I notice BA includes directories, community weeklies, business publications, cinema, direct mail and telemarketing where eMarketer does not. To properly estimate what the “local” share of total ad spends is, we need to add to the eMarketer figure those media not yet included. Looking at Borrell’s numbers only gives us the local share of each additional media but Starcom MediaVest, Cossette and other eMarketer estimates give us good estimates for these categories as well as mobile. The only 2 categories that are not yet forecasted anywhere else than through BA for 2011 are directories and direct mail which the TVB published numbers for 2010. Taking into account average growth for each and estimating a 2011 figure, adding it all to the eMarketer total, we arrive at a grand total Canadian ad spend (local + national) of $21.2 billion. This means local represents 43% of total Canadian ad spend.

I’m somewhat uncomfortable with some of their estimates. For example, they estimate directories to represent $3.3 billion total in local “print” media sales where in 2011 where the TVB estimated it at $844 million (local + national) in 2010 and every shred of news indicate the print directory business is on a downward slope. Other print which includes alternative weeklies, community weeklies and business newspapers (predominantly community weeklies here in Canada) is estimated by BA at $4.1 billion and Cossette’s estimate for 2011 is $986 million (local + national) and the CCNA (Canadian Community Newspaper Association) placed it at $1.1 (local + national) in 2010 (down almost 5% from 2009). Even their estimate for daily newspapers seems off to me where they say it’s $2.86 billion in local ad spend and eMarketer placed it at $1,97 billion (local + national).

Obviously, some fine tuning will be required here for B.A. to justify how they come up with these numbers. Maybe their numbers are truer than others, but the others have been around longer and have gained trust throughout the country.

Looking strictly at local ad spend, Borrell Associates places online in 3rd place at 17,6% of total local ad spend in 2011. This is behind community weeklies and directories, but ahead or daily newspapers. According to them, traditional media groups account for 50% of all digital local ad dollars, the other 50% going to pure plays.

BA estimates total online to be in 1st place come 2016 with an 18,7% share of total local ad spend. However, they further forecast that the total local ad spend will actually be 13% smaller, or there will be $1.9 billion less local ad spend overall. I find it odd that despite this expected downturn in local ad spend that BA expects radio to explode with 202% growth between 2011 and 2016. They further expect Local TV to grow 687% and cable TV is up 674%!!! Even direct mail (not email but paper snail mail) is expected to grow 47% in the next 5 years according to Borrell. On the other end, other print (community weeklies) is expected to almost disappear with 86% decrease in ad spend. The situation is similar for directories which they see shrinking 76% over a 5 year period.

I cannot help but wonder how serious these calculations and forecasts are. To me their methodology which may well be dead on in the US needs a lot of refining in Canada before going public with such outstanding media growth and decreases. They just seem too outrageous.

I can remember stating on behalf of IAB Canada a few years back we were seeing year over year growth of 60% (2005-2006 online ad spend in Canada) and people had a hard time believing it. I’d feel more comfortable with the numbers if there were solid reasons or explanations to back them up. The only explanation they gave for the expected growth in radio from 2011 to 2016 was expected growth in employment. I fail to see how growth in employment will help local radio ad spend so much yet at the same time negatively impact community weeklies and directories. I totally see print directories accelerating their rate of negative growth in the coming years as they transition to digital platforms, but I do not believe community weeklies will go away that quickly.

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