The Kelsey Group just issued a new forecast on online classifieds and verticals advertising:

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).

What it means: I’m a strong believer in the verticalization of the Web. So, directionally, I agree with those numbers. The first indication for me that this would be a big business was this article about Meganiches in Wired’s November 2006 issue. I forecast that the next big trend will be the “localization” (i.e. the addition of local content/business listings) of all those vertical sites.