Report: SMBs Moving Towards Interactive Media Spending - Page 2

In 2008, more than 60 cents of every SMB local marketing dollar was not spent on advertising. Instead, the spending was directed to "non-ad" categories that include trade shows, ad production, public relations, market research, sales force support and - bigger than any of the rest - promotions. This does not include more than $150 billion provided by national sources to support their stores, branches and subsidiaries. It counts only what was locally generated and locally targeted.
On the local interactive side, "non ad" spending was still taking baby steps last year. Borrell's report found less than eight cents of every local SMB interactive marketing dollar went to "non-ad" spending. During the next five years, Borrell says SMB local interactive ad spending is forecast to grow by almost 10 percent, from $6 billion to $7.5 billion. During this period, SMB share of all local interactive ad spending will drop from about two-thirds of the total pie to about half.
However, the report cautions big-picture figures can be misleading. While overall spending increases only slightly, the growth in certain interactive advertising buys increases dramatically. By 2013, Borrell says the spending habits of SMBs are likely to be very different from today, when their interactive buys consist of mainly banners and paid search (accounting for 85 percent of their interactive advertising).
The report predicts in five years, 68 percent of their spending will be on paid search and video. Spending on standard format advertising, which today accounts for 47 percent of all SMB interactive spending, is expected to account for less than 19 percent by the end of 2013. Borrell's forecast for SMB interactive spending shows a decline in local "standard format" ad spending of 6.1 percent this year, even though all U.S. businesses will increase their spending in this format an average 35.2 percent. The company predicts increases in paid search and e-mail marketing expenditures will be greater than average.
The report notes that ad spending is only part of the picture. If one looks at all spending on interactive marketing, SMBs are currently forecast to increase 24 percent during the next five years, from $7.4 billion to more than $9 billion. Borrell attributes the bulk of the increase to "non-ad" marketing, which is forecast to more than double. As a result, the percentage of ad spending in the typical SMB local interactive marketing budget will fall from last year's 92 percent to 82 percent in 2013.
Interestingly, the report found the blurring borders between what is advertising in the interactive world and what is not add to the shift to "non-ad" marketing. Small businesses in particular don't even try to make the distinction. To them, whatever they spend or do on the Web is advertising, whether it goes through an intermediary or not.
However great the gains SMBs are making toward Web-based marketing spending, the report notes many of the nation's smallest businesses still don't have Websites of their own - as much as 44 percent, according to some surveys. So, when compared to all businesses, Borrell says spending by SMBs seem to be in reverse order, with the bulk of interactive spending going toward advertising. On average for all business units, the survey found 80 cents of each Web-directed dollar goes for Website support instead.
As the survey previously noted, SMBs that may have been on the sidelines can skip some of the evolutionary steps that their larger competitors have taken in the development of their interactive marketing strategies. "Rather than starting by investing in banner ads as its more advanced competitors may have done, a small business that is just getting started on the Web can jump straight to e-mail, search and video ad formats, and employ promotion techniques that emphasize database marketing, bypassing strategies that have been outmoded," the report recommends.
The report concludes by noting the steps SMBs are taking toward Web-based marketing efforts are baby ones-but this makes them the largest areas of opportunities for media companies. "For both sides, the keys to success in the interactive marketing arena will include an understanding of the spending patterns that prevail for each size and type of business," the report asserts.