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Marchex, Inc. (NASDAQ: MCHX) recently released an industry report titled “Unlocking the Potential of the local Internet“. In the report, Marchex points out that the local advertising market will be worth an estimated $100 billion by the end of 2007. It also says that local Internet advertising is expected to be about 5% of this year’s local advertising spendings (as compared to radio, TV, newspapers, etc.). The company says that, according to Piper Jaffray’s online media survey, local Internet advertising spendings could reach 25% by 2017, which would equal $25 billion. Excerpt from the report:

The local search landscape has changed a great deal since the first city guides and online directories were launched more than a decade ago. As much as anything else, the 2005 birth of Google Maps confirmed that we have a reinvigorated local search space. Practically every major Internet destination has locally focused tabs or links; and new local sites, such as eBay’s classified site Kijiji.com, launch almost daily. A recent study by comScore Networks and TMP Directional Marketing, found that local search grew 24% so far this year, while general Web search grew only 14%.8 We are beginning to witness how powerfully the local Internet can influence the way we interact with and make decisions in the offline world.

It has been clear to me that local search traffic is growing, but Marchex’s report clarifies just how quickly local search numbers will be increasing in the next few years. This also shows why Marchex has been investing so heavily in local search businesses and geographic domain names. Local niche domains will see a surge in direct navigation traffic as people are increasingly using the Internet to find nearby businesses. Owners of local domains can profit from this trend by developing their domains into local business directories or search engines, for example, or they can continue to park their domains and watch revenues rise as more people will be using the web for local searches and more advertising dollars will be migrating from traditional media to the Internet.

You can download Marchex’s report at http://www.marchex.com/reports. By the way, you should also check out Marchex’s newly launched local search blog at LocalPoint.com.