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Local Online-Video Advertising to Soar, Reach $1.5B in 2012

Local online video ad revenues will skyrocket in the next few years, increasing from $10.9 million in 2007 to $1.5 billion by the end of 2012 - a compound annual growth rate (CAGR) of 167.8 percent - according to The Kelsey Group’s U.S. Local Video Forecast (2007-2012), writes MarketingCharts.

(See chart of local video ad revenue projection to 2012.)

The firm expects video ad products to command 11.6 percent of the online advertising budgets of small and medium-sized businesses (SMBs) by 2012, up from 0.2 percent in 2007 - a CAGR 124.5 percent.

Driving SMB adoption of online video advertising are compelling consumer usage and conversion rates. According to The Kelsey Group‘s User View study (March 2008), 62 percent of consumers surveyed said they had seen an online video ad, up from 59 percent in 2007.

Of those consumers who had seen an ad, 47.3 percent went to a website, 19.1 percent requested information about a product or service, 18.2 percent went to a store to check out a product, and 16.9 percent made a purchase. (View chart of various actions taken.)

The popularity of online video has trickled down to the local level in the form of SMB video advertising that accompanies local listings and business profiles, according to The Kelsey Group.

It said considerable opportunity exists in two growing market segments: video production companies targeting SMBs (e.g., Mixpo, Spot Runner, SpotMixer, TurnHere) and Yellow Pages publishers adding video to their local sales bundles.

“Publisher sales channels put Internet Yellow Pages [IYP] in the strongest position to benefit from SMB and user demand for local online video,” said Matt Booth, senior vice-president and program director for The Kelsey Group’s Interactive Local Media practice. “At the same time, local video growth will hinge upon IYP execution of sales and video networks’ distributed production and fulfillment.”

According to the report, the general appeal of video and its simplicity compared with other forms of online advertising are leading to relatively high close rates from deployed sales representatives. This includes new advertisers that are not traditionally sold on Yellow Pages advertising.