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Main Street Goes Interactive: How Small Businesses are Spending Their Online Dollars

  • ID: 1055622
  • Report
  • June 2009
  • Region: United States
  • 42 Pages
  • Borrell Associates Inc
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Are small- and medium-sized business owners changing their spending habits? Are they abandoning traditional media for the Internet? Is the recession a tipping point for their ad spend?

This Borrell Associates Inc. Report report takes a detailed look at 14.6 million small and medium businesses that are responsible for more than half of all interactive spending and gives you the latest insight into these questions and more.

Last year SMBs spent $6.7 billion on online advertising and are poised to spend even more in 2009. In addition, the publisher expects them to triple their annual spending in the next few years on their own Web sites -- something that doesn't count as "advertising" at all, though the SMBs see it as such.

The concept of saving Main Street is not only in vogue, but is also turning out to be a noble cause for local agencies and media companies trying to help their customers -- and themselves -- survive a brutal economy.

This report is designed to provide detailed insights into understanding what SMBs and doing, and what they need.

A copy of the recodring of the webinar is also available for those who purchase the report. Please contact us for further information.
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Executive Summary

CHAPTER 1 – Hunting the Elusive SMB
Fig.1.1: U.S. Business Units by Employee Size Cohort
Fig.1.2: Cumulative Share by Employee Size Cohort
Fig.1.3: Media Spending Variation by Employee Size
Fig.1.4: Ad Spending by Media Spending Stage
Fig.1.5: Ad Spending Variation by Media Spending Stage
Fig.1.6: Percentage of Online and Oine Ad Spending Shared by Each Media Stage
Fig.1.7: Media Stage Prole for Building Contractors
Fig.1.8: Media Stage Prole for General Merchandise Stores

CHAPTER 2 – What’s happening in River City
Fig.2.1: 2008 Estimated SMB Local Interactive Ad Spending
Fig.2.2: 2008 SMB Local Interactive Ad Spending by Media Stage
Fig.2.3: 2008 SMB Oine and Interactive Ad Spending, Showing “Big 3” Shares

CHAPTER 3 – A Walk down Interactive Main Street
Fig.3.1: SMB Local Ad Spending - Top 25 Categories, Ranked by Online Share
Fig.3.2: Online Media Shares of SMB Media Stage 1 and 2 Online Ad Spending

CHAPTER 4 – More Goes Toward “Non-Ad” Marketing
Fig.4.1: SMB Ad and “Non-Ad” Share of ’08 Local Marketing Spend
Fig.4.2: SMB Ad and “Non-Ad” Share of ’08 Local Interactive Marketing Spend
Fig.4.3: SMB ’08 Local Interactive “Non-Ad” Spending - Share by Category

CHAPTER 5 – The Future of Interactive Main Street
Fig.5.1: Forecast SMB Local Interactive Ad Spending, Compared with
Fig.5.2: 2009 Spending Plans for Selected Media Choices
Fig.5.3: Selected Advertising Channels - Percent saying “Perform Strongly for my company”
Fig.5.4: 2008 to 2013 Change in SMB Interactive Marketing Spending
Fig.5.5: Change in SMB Local Interactive Marketing Budget, 2008 - 2013

CHAPTER 6 – Where the Money Goes: “My Own Web site”
Fig.6.1: Web site Support Spending for SMBs
Fig.6.2: SMB Web Spending Compared to All U.S. Businesses
Fig.6.3: Online Services Spending by Category - SMBs vs. All U.S. Business Units

Conclusions and Recommendations

Appendix A
Appendix B
Appendix C
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As larger businesses appear tapped out, headed for bankruptcy, or just extremely reluctant to continue longstanding advertising practices, local media companies are scrambling to and new customers along Main Street. These small- and medium-sized businesses, or SMBs, in aggregate may seem like a bonanza: There are more than 14.6 million SMBs, and they tend to overspend on advertising relative to their size.

In reality, however, the SMBs in any market are less like a two-ton gorilla and more like a thousand four-pound monkeys – dicult to chase down, and almost impossible to corral 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 on coupons. But all that’s changing with the rise of the Internet – where they are now investing 11 percent of their advertising, up from less than 4 percent three years ago.

These SMBs are blurring the lines between what’s advertising and what’s not. They consider whatever they spend on their own Web sites to be “advertising,” though in actuality that spending is a technology, design and telecommunications expense. When marketing professionals were asked in which media they intended to spend more money this year, two thirds of them said …. “my own Web site.”

As their Web sites look increasingly like storefronts with shopping carts and checkout counters, SMBs are being deluged with oers to drive trac to them by placing listings in online directories, bidding for keywords on search engines, running e-mail marketing campaigns, and buying display ads on media Web sites.

The SMBs are listening, but not quite 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. And they are diverting money toward something that feels to them like advertising, but in reality is technology-supported marketing: Web site design, search engine optimization and customer databases.

Their current rate of interactive advertising spending is no drop in the bucket. The nation’s 14.6 million SMBs were responsible for more than $6.9 billion in locally generated, locally targeted interactive advertising in 2008 – more than half of the U.S. total. And while the smaller merchants spent less than $300 each on Web site support last year, Borrell Associates Inc. are forecasting that SMBs will triple this “non-advertising” marketing expenditure over the next few years. SMBs are collectively poised to plow billions of dollars into their own Web sites.

The owners of small businesses would be well advised to understand these trends as they look to the Internet to help stimulate sales from both inside and outside their market. Many Internet marketing products are oversold and under perform. Some work well. And a few work phenomenally well. Understanding the nuances of online marketing is even more important for local media companies trying to serve this smaller, lower-ticket advertising segment. This report helps identify SMBs and dissects this mass migration toward interactive media.
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Borrell Associates is a research and consulting firm that tracks local ad spending across all 11 forms of media (online, newspapers, direct mail, cable, radio, etc.) and helps media companies develop executive strategies. We produce industry-related reports, oer revenue benchmarking, give presentations to companies and trade associations, conduct online sales training and Webinars, and provide executive-level consulting services.

In addition to the expertise oered by our top-level associates, our primary strength is local factbased analysis. Our Local Ad Spending Report (LA$R) and Local Online Advertising Detail (LOAD) report deliver detailed advertising data for any local market and/or spending category.
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