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Though the bulk of today’s geotarged ad sales take place in the search arena, the geotargeted display (aka banner) ad market in the US is expected to grow from $897 million in 2008 to $1.9 billion in 2013, representing a compound annual growth rate of 16%, according to a new report from BIA/Kelsey.

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The forecast also anticipates that the geotargeted display market will grow from 10.2% of all display ads sold in 2008 to 15% by 2013.

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The locally bought portion of the market, which primarily comprises small and medium-sized businesses (SMBs), will see the highest growth, at a CAGR of 66%, BIA/Kelsey said. The segment will grow from $45 million in 2008 to $565 million by 2013. Further, the SMB market will swell from 5% to 30% of the total geotargeted market over the same period.

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BIA/Kelsey anticipates that geotargeted display advertising will soon be sold alongside geotargeted search advertising as reseller sales forces look to localize the current glut of banner ad space in efforts to improve their economics and diversify their interactive revenue streams.

“The basis for growth of the geotargeted ad market is rooted in the economics of existing search resellers,” said Matt Booth, SVP and program director, interactive local Media, BIA/Kelsey. “The effective strategy for companies like AT&T, ReachLocal, Yodle and others will be to use geotargeting to increase margins by shifting spend from paid search to geodisplay. Simply, if a lead from search costs $30, these companies will shift to display where similar quality leads can be obtained for less.

Booth noted that the display ad networks have so much excess inventory; they will run whatever impressions are needed to meet reseller targets.

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