America’s 14.6 million small and medium-sized businesses (SMBs) were responsible for more than $6.7 billion in locally generated, locally targeted interactive advertising in 2008 - more than half of the US total, according to a recently released report from Borrell Associates, which predicts these numbers will grow significantly as activities continue to shift online.
The report, “Main Street Goes Interactive,” examines the marketing and advertising practices for SMBs, and reveals that the overall shift toward spending online is continuing in a significant way. While many of the smallest businesses have traditionally invested in Yellow Pages or on direct mail ads or on coupons, SMBs overall now report they are now investing 11% of their advertising dollars online, up from less than 4% three years ago.
Blurring the Advertising Lines
Although SMBs report they are spending more money on online advertising, Borrell found they are increasingly blurring the lines between what has traditionally been considered advertising media expenditure and what has not. Many SMBs consider money spent on their own websites to be “advertising,” though in actuality that spending is a technology, design and telecommunications expense. For example, when marketing professionals were asked in which media they intended to spend more money this year, two thirds of them said “my own website.”
In addition to website design, this investment in technology-supported marketing, Borrell said, also includes search engine optimization and customer databases. Borrell forecasts that SMBs will triple this “non-advertising” marketing expenditure over the next few years and its share of the local interactive marketing budget will rise from 8% in 2008 to 18% in 2013. “SMBs are collectively poised to plow billions of dollars into their own websites,” the report said.
Search Ads Gain Favor
The study also food that SMBs are becoming less receptive to buying banner ads - which now account for a declining 54% of their online spending - in favor of search-engine advertising, online directory listings, and streaming video.
Only 42.1% of survey respondents say that display advertising performs strongly for their company, compared with 56.8% who say search performs strongly, and 80.4% who say email performs strongly.
Challenges in Reaching the SMB Market
Though small businesses do tend to overspend on advertising relative to their size and appear to present a significant and largely untapped market for online advertising, the report said it may be more difficult than it first appears for local media companies to wring predictable, increased investment from them because they are “less like a two-ton gorilla and more like a thousand four-pound monkeys, difficult to chase down and almost impossible to corral.”
As they face an increasing deluge of offers to buy listings in online directories, to bid for keywords on search engines, to set up email marketing campaigns and purchase display ads, the owners of SMBs need to understand current options and practices for online marketing, Borrell Associates stated, adding that though some internet marketing products work very well, many “are oversold and under perform.”