Will verticals emerge as the key driver of online advertising in the near future? Most definitely, according to a new report by the Kelsey Group. Make that 2012, to be specific.

In recent years, search, banners, e-mail and lead generation have been responsible for the explosive growth in interactive advertising, but that is soon about to change, with vertical advertising taking the lead. Here is what the Kelsey report stated:

While online advertising has been propelled primarily by search, banners, e-mail and lead generation, The Kelsey Group expects verticals to emerge as a key driver of online advertising by 2012. Based on trend analysis, the firm forecasts the U.S. interactive classified and vertical share of online advertising will grow from 18 percent in 2007 to 24 percent by 2012. Revenues for interactive classifieds and verticals will grow from US$3.9 billion to US$14.7 billion during the same forecast period, representing a 30.5 percent compound annual growth rate (CAGR).

During the forecast period, U.S. online classifieds will grow from US$3.9 billion to US$9.1 billion (18.6 percent CAGR) and online verticals (such as home services, home and garden, health care, legal and auto repair) will grow from US$100 million to US$5.6 billion (461.4 percent CAGR).

Kelsey based its results on trend analysis, and stated the vertical share of interactive advertising will grow from 18% in 2007 to 24% in 2012. Revenues for interactive classifieds and verticals will mushroom from $3.9 billion to about $14.7 billion in the same period, representing a 30.5% compound annual growth rate.

Kelsey based its results on trend analysis, and stated the vertical share of interactive advertising will grow from 18% in 2007 to 24% in 2012. Revenues for interactive classifieds and verticals will mushroom from $3.9 billion to about $14.7 billion in the same period, representing a 30.5% compound annual growth rate. According to Kelsey Group Program Director Peter Krasilovsky (who was also the cochair of the Drilling Down on Local 08 conference): Vertical businesses are harnessing the network effects of the Internet, much like Expedia and others did for travel in the late 1990s. We’re seeing an accelerated effect from fragmentation, which will draw ad revenue from traditional media toward online vertically targeted solutions. Kelsey based its results on trend analysis, and stated the vertical share of interactive advertising will grow from 18% in 2007 to 24% in 2012. Revenues for interactive classifieds and verticals will mushroom from $3.9 billion to about $14.7 billion in the same period, representing a 30.5% compound annual growth rate.According to Kelsey Group Program Director Peter Krasilovsky (who was also the cochair of the Drilling Down on Local 08 conference): Vertical businesses are harnessing the network effects of the Internet, much like Expedia and others did for travel in the late 1990s. We’re seeing an accelerated effect from fragmentation, which will draw ad revenue from traditional media toward online vertically targeted solutions.

Kelsey based its results on trend analysis, and stated the vertical share of interactive advertising will grow from 18% in 2007 to 24% in 2012. Revenues for interactive classifieds and verticals will mushroom from $3.9 billion to about $14.7 billion in the same period, representing a 30.5% compound annual growth rate.According to Kelsey Group Program Director Peter Krasilovsky (who was also the cochair of the Drilling Down on Local 08 conference): Vertical businesses are harnessing the network effects of the Internet, much like Expedia and others did for travel in the late 1990s. We’re seeing an accelerated effect from fragmentation, which will draw ad revenue from traditional media toward online vertically targeted solutions.

Kelsey based its results on trend analysis, and stated the vertical share of interactive advertising will grow from 18% in 2007 to 24% in 2012. Revenues for interactive classifieds and verticals will mushroom from $3.9 billion to about $14.7 billion in the same period, representing a 30.5% compound annual growth rate.According to Kelsey Group Program Director Peter Krasilovsky (who was also the cochair of the Drilling Down on Local 08 conference): Vertical businesses are harnessing the network effects of the Internet, much like Expedia and others did for travel in the late 1990s. We’re seeing an accelerated effect from fragmentation, which will draw ad revenue from traditional media toward online vertically targeted solutions.

Is the mighty giant looking a little vulnerable these days? According to Reuters report last month, Google’s share of the global Web search market took a steep dive last February (even if its U.S. market share rose), Internet financial analysts revealed. ComScore research data showed that the search engine giant’s dominance of the worldwide market for Web search dipping to 62.8% in February from 63.1% the month before.

Financial analysts look at the monthly comScore search market data as an indicator on growth trends in Web search. Other monthly reports have fuelled debate on Wall Street over whether the market is, indeed, maturing, even though year-to-year growth rates remain high. The volume of U.S. searches done through Google dropped to 5.86 billion from 6.14 billion in February, and the worldwide volume of searches also declined, comScore said.

According to analyst Youssef Squali of Jefferies & Co: “We are continuing to see deceleration in growth in Web search. Google’s month-over-month 5 percent decline is a little surprising, but all of the major Web search names were down.”

The decline was due in part to the month of February being two days shorter than January, comScore revealed. Yet several analysts believe it may also reflect a maturing market. By contrast, searches rose 9% in January over December. Amid this decline in the global market, Google shares closed off $7.16, or 1.6%, to $432, while Yahoo fell 59 cents, or 2.1% to $27.07.

The Reuters article also stated that investors have begun to focus on how well Google is converting Web searches into ad viewership.Analyst Mark Mahaney of Citigroup, on the other hand, blamed the company’s decelerating growth in recent months on the computer-based Web search market.

When deciding whether to spend advertising dollars on the Internet Yellow Pages (IYP) or on Search Engine Marketing you might want to consider the pros and cons along with these four main factors:

1. Ease of Use
Some of the challenges of SEM is the learning curve. This factor is especially relevant for small to medium enterprises (SMEs). Many SMEs find SEM confusing, but are too busy running their businesses to spend valuable resources trying to learn about it.
The Yellow Pages have a huge local sales force that can work personally with advertisers, who often find it easier to buy a full Yellow Pages online/print package than to invest time and money in learning search marketing.

For those who do venture into SEM, the upkeep can be overwhelming. You have to continue to monitor keywords to ensure good placement among paid listings and this can be a lot of work. Again, it is small to medium businesses that suffer most in this area – they generally do not often have the resources to manage an SEM campaign, especially if it has a pay per click (PPC) component.

2. Cost
Arguments about cost can be made for and against both methods. Without careful planning and vigilance, a PPC campaign can become quite expensive. Costs are generally static in IYP but can fluctuate with PPC, depending on the number of clicks.
The flip side of this argument is that PPC is more appealing because businesses only pay when their ad is clicked, unlike a flat-rate (and often expensive) Yellow Pages ad, which an advertiser pays for regardless of how many people actually see it.

3. Ad Content and Local Search
SEM is weak in the area of local search. For this reason businesses tend to choose the Yellow Pages because it has brand recognition among consumers looking for local companies. Also Yellow Pages online sites are destination sites for business searches and this also enhances their appeal to business owners.

Another advantage of the Internet Yellow Pages is the content of the listing itself. IYP listings contain more information from the advertiser than a search engine listing, and that information is presented in a way that is familiar to users. These copy points include hours of operation, location, brands carried and payment methods accepted.
On the downside, the online Yellow Pages are often behind the search engines in the area of innovation and in what marketers call non-advertisercopy points. I mean including things like integrated maps, user reviews, and ratings with their business listings.

4. Search Options
IYP is limited in the search options they offer compared to search engines which allow for broad keyword searches. While there has been improvement from the very first online directory models many IYP directories only allow for a category and business name search. The better IYP directories have added keyword searching but still, the results are not always relevant. Look for the IYP to improve in this area so they can compete with search engines. Also, several Yellow Pages publishers have included the packaging of Google Ad Words in their enhanced service listings.

Search is measurable and an integrated approach that recognizes that both a strong IYP and SEMM program delivers sales leads means this is the optimal way to go.