Report: SMBs Moving Towards Interactive Media Spending

An extensive report from Borrell Associates finds small to medium-size businesses are gearing up to spend billions more in "non-advertising" marketing over the next five years.

A report by research and consulting firm Borrell Associates finds small to medium-size businesses are planning on tripling their "non-advertising" marketing (Web-based advertising and other online promotions) by 2013.

However, the report, "Main Street Goes Interactive," predicts interactive ad spending will post only modest gains- 10 percent over the next five years. The smallest U.S. businesses have average annual sales of $212,000 and spend just $5,671 per year on advertising - typically in the yellow pages or on direct mail ads or coupons. But all that is changing with the rise of the Internet - where midmarket companies are now investing 11 percent of their advertising, up from less than four percent three years ago. The report finds SMBs are listening, but not yet fully cooperating.

"They are less receptive to buying banner ads (now accounting for 54 percent of their online spending, but declining) in favor of search-engine advertising, online directory listings, and streaming video," the report notes. "And they are diverting money toward something that feels to them like advertising, but in reality is technology-supported marketing: Website design, search engine optimization and customer databases."

However, the report notes their current interactive advertising spending is no "drop in the bucket." Borrell found the nation's 14.6 million SMBs were responsible for more than $6 billion in locally generated, locally targeted interactive advertising in 2008 - more than half of the U.S. total. While the smaller merchants spent less than $300 each on Website support last year, the company is forecasting that SMBs will triple "non-advertising" marketing expenditure over the next few years. The report found SMBs are collectively poised to plow billions of dollars into their own Websites.

The nation's SMBs spent more than $6.9 billion on locally generated, locally targeted interactive advertising in 2008 - more than half of the U.S. total. Fifty-four percent of their spending went to "standard format" ads, the pop-ups and banners that preceded all other formats of interactive advertising. Almost a third went to paid search, and smaller amounts to e-mail marketing and streaming audio/video.
The interactivity of Web advertising is also making a big impact on yellow pages publishers. As broadband's "always on" capability and fast speeds make business look-ups on the Web faster than using the printed directory, the report found the books are taking a steep hit. Richer and more current content give online directories a huge advantage over the books, and Google's practice of listing businesses, addresses and phone numbers at the top of the search results hasn't helped. Borrell's projections call for a 38 percent decline in yellow pages advertising over the next five years, the steepest of any media.