More than two decades have passed since the first online ads appeared on AOL, CompuServe and Prodigy. People have gone from logging on to computer bulletin boards to surfing the Internet to riding the information superhighway to going online to “becoming interactive.” It’s now a mature medium, holding the largest share of many ad budgets. And it’s certainly no longer “new media.”
But one big thing has been missing. Unlike other media, digital is without its own geographic trading area. Television has its Designated Marketing Area (DMA®), defined by the radius of a broadcast signal. Cable companies have franchise regions, defined by the farthest reaches of its cable lines. Radio has its Arbitron markets. Direct Mail has ZIP Codes. And newspapers, yellow pages and magazines have their Metropolitan Statistical Areas (MSAs) and Core Business Statistical Areas (CBSAs), which typically track the outer boundaries of where their circulation trucks travel.
Digital media? Nothing. Digital media managers have had to toil within the confines of other media’s geographies much the way many of them have been forced to wedge their digital strategies into a traditional media business model. Those geographies, however, don’t have much to do with how consumers behave while engaging with digital media.
Enter Digital Marketing Regions, or DMRs. With deep knowledge of online marketing activity at the local level – and a lot of help from the industry – we have segmented the nation into 513 unique DMRs. Each defines a separate, integral local online advertising market. Click here to view the interactive DMR market map.
How DMRs Were Created
The development of a useful online marketing geography has been a goal at Borrell Associates for several years. Several attempts were made using secondary data from national surveys. Some used online spending as a base. Others relied on ownership of computing devices. All failed because of the sparse sample size available in rural areas. It became apparent that two very different approaches to modeling geographic boundaries for local online marketing had to be considered:
- One based on inward focus toward a central point. Imagine businesses several miles outside the core trying to lure consumers to their shops.
- One that maps the boundaries of outward flow for local online marketing efforts.
The questions were: What defined the central point, and what metric might define the boundaries for the outward flow? A breakthrough came two years ago. Work on a special customer project revealed that, in many user-defined markets, the local online advertising expenditures within a group of surrounding counties came close to equaling that of an area’s “core” or central county.
This relationship makes sense. If done correctly, local online marketing specifically targets potential customers likely to make the trip to the advertiser. Determining the range of this marketing effort can be difficult. It must take into account the density of the surrounding population, the number of competitors in the market, travel patterns to and from work, and usage of various digital devices. Our estimates, which look at the “import” of ad spending from surrounding areas as well as the “export” of ad spending to nearby markets, have allowed the development of defined regions that describe the reach of locally generated, locally spent online marketing efforts.
The idea of using county-level local online ad spending estimates to define a local digital advertising geography was extensively tested, including the submission of market definitions and data to several clients for feedback. After several market adjustments, we settled on a set of four rules to define DMRs. They are:
- Each DMR must have a central or core county. The amount of local online ad spending in this county decides the size of the DMR.
- The local online spending for each county adjoining the central county is subtracted from the “core” total, until the remaining total approaches zero, or until the area is blocked from further growth by a larger neighbor.
- Negative totals are not allowed.
- All counties in a DMR must be contiguous.
Using these rules, a computer program was developed to automatically map the nation into a county-level local online advertising geography. After several trial runs over the summer and feedback from local media managers, a total of 513 DMRs were identified.
The DMRs share interesting characteristics. Most are far smaller than television market areas. Many are bounded by a river or a mountain range, indicating that physical proximity is not simply a matter of distance – easy access is also part of the equation. DMRs get larger in sparsely populated areas (New England and the southwest, for example). This is simply because there is a greater distance between core counties in these areas. It’s also an indicator that shoppers in these rural areas must travel farther to shop than their urban cousins – behavior supported by other research.
Indeed, the distance consumers are willing to drive to make certain purchases – to visit a shopping mall or buy a car, for example – is pivotal to the physical size of DMRs. These geographies become larger as the ratio of local online ad spending in the “core” county to any surrounding county grows. As this ratio shrinks, so does the size of the DMR.
To further explore the DMR concept, we offer details on three of these regions: a heavily populated eastern market, a smaller southern market, and a rural western market.
DMR No. 80: Providence, RI
The Providence DMR consists of five counties in Rhode Island (Providence, Kent, Newport, Washington, and Bristol). At its core is the city of Providence, a bustling town at the head of Narragansett Bay that’s also part of the greater Boston commuting area. The Providence DMR’s total local online ad spending is projected to reach $55.2 million this year.
The area is 20 miles wide by 55 miles long – but the population is relatively high (1.06 million, an average of 965 people per square mile). There are several shopping malls within easy driving distance of any adult living within the DMR boundaries, including Providence Place Mall, Warwick Mall and Emerald Square Mall. Providence ranks 80th among DMRs in terms of the amount spent by local businesses on digital advertising.
DMR No. 353: Havelock-New Bern, NC
This southern DMR consists of three counties in coastal North Carolina (Jones, Craven, and Pamlico). At its center is the quaint waterfront town of New Bern, situated at the confluence of the Trent and Neuse Rivers and where author Nicholas Sparks set his novel-turned-movie, “The Notebook.” The region is a quiet coastal plain community of crape myrtles and Southern history, dissected by U.S. Route 17 and benefiting from the flow of southbound travelers headed to the Carolina shores and beyond. The region’s total local online ad spending is projected to reach $5.6 million this year. Much of it comes from New Bern’s hotels, restaurants, antique shops, B&Bs and specialty shops.
The Havelock-New Bern DMR consists of about 1,350 square miles, much of it corn and tobacco fields. Its population is 127,900, or about 95 people per square mile, even though most of its residents live in Craven County. Driving distances to malls and other shopping averages roughly 20 percent longer than the same trip in more heavily populated regions like Providence.
DMR No. 77: Tucson, AZ
This southwestern region stretches from New Mexico to the edge of California – over 10,800 square miles – most of it desert. It consists of three Arizona counties (Pima, Cochise and Santa Cruz) as well Hidalgo County, New Mexico. Tucson’s major industry is land development, and it is home to both the University of Arizona and the airplane graveyard, where both military and civilian owners of airplanes bring them to be stored for later use. Local online ad spending here is forecast to reach $58.7 million this year.
The Tucson DMR’s population is more than 1.2 million – about 112 people per square mile. But this average is deceiving. Four out of five people live in Pima County, in and around Tucson. Less than 200,000 live in the rest of the region – less than 20 people per square mile. This minority is used to driving 50 miles or more to go to a movie, buy a book, or shop for clothes or a car – a 70 percent increase over the average U.S. household. Tucson ranks 77th among DMRs for local online ad spending.
We hope you will take the time to examine Borrell’s new media geography, and that you will consider utilizing its power to help craft more accurate and efficient marketing efforts. We’d love to hear your comments and criticisms to help strengthen this market tool over the coming months and years. Please send feedback to info@borrellassociates.com, or call us at 1-757-221-6641.
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